And to all the freaks and geeks on the Internet for being the world’s greatest teachers.
Thank you.
CONTENTS
Foreword
Keywords
Who’s Who
SECTION I: WHAT IS BITCOIN?
Chapter 1: Bitcoin 101: Blockchain Technology
Chapter 2: A Practical Guide on How to Buy, Save, and Spend Bitcoins
Chapter 3: Precursors, History and Creation, Satoshi’s White Paper
Chapter 4: Who Runs Bitcoin?
Chapter 5: What Gives Bitcoin Its Value?
Chapter 6: Bitcoin: Anonymous or Pseudonymous?
Chapter 7: Bitcoin and the Criminal Element
Chapter 8: Mt. Gox: Bitcoin’s Defining Moment?
Chapter 9: Other Bitcoin Scams and Common Tactics
SECTION II: HOW TO INVEST IN BITCOIN
Chapter 10: How to Buy Bitcoin with a Bank Account, Cash, or PayPal
Chapter 11: Working for Bitcoin
Chapter 12: Mining
Chapter 13: HODL!
Chapter 14: Day Trading
Chapter 15: Altcoin Trading and Pump-and-Dumps
Chapter 16: Peer-to-Peer Lending
Chapter 17: Investing in Other Commodities Using Bitcoin
SECTION III: WHAT CAN BITCOIN DO FOR ME?

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Keywords
altcoin: Short for “alternative cryptocurrency”; another cryptocurrency similar to Bitcoin. There are more than a thousand altcoins currently in existence; most are nearly exact copies of more successful cryptocurrencies, but some very innovative ones have been produced as well.
ASIC: Application-specific integrated circuit. A piece of hardware designed to do one thing and one thing only. In the cryptocurrency world, it mines for a specific algorithm (SHA256, Scrypt, etc.).
BFGMiner: The second most-popular Bitcoin-mining software.
Bitcoin/bitcoin: Bitcoin with a capital B refers to Bitcoin the system, the network or the currency as a whole; bitcoin with a lowercase b refers to individual bitcoins, as in, “I have five bitcoins.”
Bitcoin-Qt: Also called Bitcoin Core, it is the primary implementation of Bitcoin and what all other wallets and services are based on.

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If wallet A sends wallet B five bitcoins and then wallet B sends five bitcoins to wallet C, it is easy enough to assume wallet A was sending wallet C five bitcoins using wallet B as an intermediary.
Combining several Bitcoin users’ transactions makes it more difficult to track but not impossible. If wallet A, wallet B, and wallet C send bitcoins to a mixing service (wallet D) and then pass that money onto wallets E and F but don’t want outside sources knowing who sent what to whom, simply sending their bitcoin to wallet D is not enough.
If wallet A puts two bitcoins, wallet B puts six bitcoins, and wallet C puts nine bitcoins into the CoinJoin wallet—and then two bitcoins are sent to wallet E in one transaction, another six are sent to wallet E in a second transaction, and nine bitcoins are sent to wallet F—then we can safely assume that wallet A sent two bitcoins to wallet E, wallet B sent six to wallet E and wallet C sent nine to wallet F.

One of the first was Peter Vessenes: Blog post, “Bitcoin Startup Incubator, CoinLab, Launches in WA,” Bitcoin News Network, September 25, 2011, http://www.btcnn.com/2011/09/bitcoin-startup-incubator-coinlab.html.
Bitcoin Magazine, founded by Mihai Alisie: According to Bitcoin Magazine “About Us” page, http://bitcoinmagazine.com/about-us/.
In September 2012, the Bitcoin Foundation was founded: Jon Matonis, “Bitcoin Foundation Launches to Drive Bitcoin’s Advancement,” September 9, 2012, http://www.forbes.com/sites/jonmatonis/2012/09/27/bitcoin-foundation-launches-to-drive-bitcoins-advancement/.
At that time, the Bitcoin Forum had about sixty-eight thousand members: Taken from statistics page at Bitcoin Forum, https://bitcointalk.org/index.php?action=stats.
Beginning in March 2012, thefts totaling: “Bitcoinica, Twice Hacked in 2012, Is Being Sued,” Infosecurity Magazine, August 15, 2012, http://www.infosecurity-magazine.com/news/bitcoinica-twice-hacked-in-2012-is-being-sued/.

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Just as songs that are sung at football games, artwork depicting the Stars and Stripes on the back of Jeeps, and stirring recitals of the Declaration of Independence help to burnish Americans’ faith in their nation’s greatness, so, too, can cultural production help strengthen other communities—even one formed around a currency. And so we find bitcoin literature, bitcoin poetry, bitcoin artwork, bitcoin photography, and bitcoin songs. It’s a striking demonstration of how much this idea has captured people’s imagination. Nobody writes songs about PayPal.
“Oh, bitcoin, I know you’re gonna reign, gonna reign,” John Barrett sings in his bluegrass “Ode to Satoshi,” recorded in a studio in East Nashville, Tennessee. “Till everybody knows, everybody knows, till everybody knows your name.” He’s not alone in his choice of song topic: “10,000 Bitcoins” is a love song by Laura Saggers; “Bitcoin Barons” is a rap piece by YTCracker; and there are a handful of others. Meanwhile, the German artist Kuno Goda painted 200 Bitcoins, with the bitcoin logo repeated two hundred times on a canvas—a play on Andy Warhol’s 200 One-Dollar Bills.

They were also downloading and running the Bitcoin software. The number of downloads would jump from around three thousand in June to over twenty thousand in July. The day after the Slashdot piece appeared, Gavin Andresen’s Bitcoin faucet gave away 5,000 Bitcoins and was running empty. As he begged for donations, he marveled at the strength of the network:
Over the last two days of Bitcoin being “slashdotted” I haven’t heard of ANY problems with Bitcoin transactions getting lost, or of the network crashing due to the load, or any problem at all with the core functionality.
But while the Bitcoin software itself was working well, new users quickly ran up against the limitations of the Bitcoin ecosystem. Those who immediately wanted to acquire more Bitcoins than were available from Gavin’s faucet were left with only a few meager options, one of them a creaky, unreliable service that Martti had set up a few months earlier.

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At the same time that he was buying, Roger announced on the Bitcoin forums that his computer hardware company, Memory Dealers, would immediately begin accepting payment in Bitcoin. Not long after that, he turned a regular Memory Dealers’ advertisement that he paid for on Free Talk Live into an advertisement for Bitcoin and crowdsourced the copy for the ad from the Bitcoin forums. Soon enough, he had put up a gold-and-black billboard, on the side of an expressway in Silicon Valley, with an enormous Bitcoin emblem and the phrase “We Accept Bitcoin,” over the Memory Dealers web address. The crowd on the forums went wild.
“God I love Bitcoin!” one user wrote.
“We needed this,” another said.
Roger said he was looking to do even more: “I promise I’m doing whatever I can to help make Bitcoin succeed (Billboards, National radio ads, etc.).”
Roger’s appearance on the scene coincided with the first mainstream news coverage for Bitcoin, which helped push the price up, and, in turn, led to more mainstream news coverage.

And you can pay for things with them via electronic banking, by cheque, credit card, or in cash.
But where on earth do you get bitcoins?
There are three ways.
You can get paid in bitcoins. You can buy bitcoins. And last of all (the very unconventional bit), you can make bitcoins. Yes, you can, literally, create money.
You earn bitcoins by doing or selling something in exchange for bitcoins – just as you would earn normal money. If I do this job for you, you pay me in bitcoins.
You buy bitcoins just as you would buy and sell foreign currency – from the Bitcoin equivalent of a bureau de change, known as a Bitcoin exchange, or directly from an individual. You hand over your dollars, pounds or whatever currency you’re using and you receive bitcoins.
To create bitcoins, you run the Bitcoin software on your computer. It’s called ‘mining’ – more on that later.

What actually happens when you send an email through Gmail to, say, someone with a Yahoo address is that a Google server reaches out to a Yahoo server and transmits a text file; then the Yahoo server says to its user, ‘you’ve got mail’.
So, a protocol is an agreed system by which information is shared across a network.
Bitcoin – with a capital ‘B’ – is another protocol. The function of the protocol is to send and receive payment information.
With Bitcoin, your computer reaches out to another user’s computer, gives it some binary gibberish proving you control X number of coins at this address and want them to increase the balance at that address.
The unit of money on the Bitcoin protocol is the ‘bitcoin’ (with a small ‘b’). As the dollar is the unit of money on the US banking network, so bitcoin is the unit of money on the Bitcoin system.
So, Bitcoin is two things – a protocol and a unit of money.
How do you get bitcoins?
Using dollars or pounds is easy.
You get paid in them. They’re in your bank account (hopefully).

That’s the essence of a master-slave relationship.
"Bitcoin is fundamentally different because in bitcoin, you don’t owe anyone anything and no one owes you anything. It’s not a system based on debt."
Bitcoin is fundamentally different because in bitcoin, you don’t owe anyone anything and no one owes you anything. It’s not a system based on debt. It’s a system based on ownership of this abstract token. Absolute ownership. We have an expression in the United States, which is “possession is nine-tenths of the law.” In bitcoin, possession is ten-tenths of the law. If you control the bitcoin keys, it’s your bitcoin. If you don’t control the bitcoin keys, it’s not your bitcoin. You’re back to a master-slave relationship.
"In bitcoin, possession is ten-tenths of the law. If you control the bitcoin keys, it’s your bitcoin. If you don’t control the bitcoin keys, it’s not your bitcoin."
2.4.

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There is a beautiful site called bitcoinobituaries.com where you can read the pronouncements of the death of bitcoin since 2009 — regularly, like clockwork every three to six months, major newspapers, scientists, etc., saying, "That’s it. Bitcoin is dead." In fact, this has now become an amazing recruitment opportunity because all you have to do is wait for people to hear that bitcoin died, the CEO of Bitcoin was arrested, or bitcoin was shut down by Putin, and then, four months later, someone says, "You know there are some interesting new applications on bitcoin." And they go, “Bitcoin is still there?"
“Bitcoin is still there” is the marketing slogan of this community. If we can just keep doing “bitcoin is still there,” people are surprised, they’re confounded. It doesn’t match their expectations. It’s not possible that bitcoin is still there because very serious people with very serious titles, working for very rich companies, told them that bitcoin was not going to be there.

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When people hear that message, maybe the next day they come to one of these meetups and they meet a dentist who owns bitcoin, an architect who owns bitcoin, a taxi driver who uses bitcoin to send money back to their family—normal people who use bitcoin to give themselves financial power and financial freedom. Every time that message is broken by cognitive dissonance, bitcoin wins. All bitcoin really has to do is survive. So far, it’s doing pretty well.
3.11. Currencies Evolve
In the new network-centric world, currencies occupy evolutionary niches. They evolve, like species, based on the stimulus they have from their environment. Bitcoin is a dynamic system with software developers that can change it. The question is, in which direction will bitcoin evolve? Which environmental niche will it attempt to fit in? And how will that be affected by the actions of the powerful? If they attack bitcoin, it evolves to defend itself against predators, just like any species.

PayPal had been known for being on the edge of financial innovation, but it then became more corporate focused and lost the possibility of providing early market leadership with regard to Bitcoin. Now, PayPal has been incorporating Bitcoin slowly, as of September 2014 announcing partnerships with three major Bitcoin payment processors: BitPay, Coinbase, and GoCoin.37 Also in September 2014, Paypal’s Braintree unit (acquired in 2013), a mobile payments provider, is apparently working on a feature with which customers can pay for Airbnb rentals and Uber car rides with Bitcoin.38
In the same area of regulation-compliant Bitcoin complements to traditional financial services is the notion of a “Bitbank.” Bitcoin exchange Kraken has partnered with a bank to provide regulated financial services involving Bitcoin.39 There is a clear need for an analog to and innovation around traditional financial products and services for Bitcoin—for example, Bitcoin savings accounts and lending (perhaps through user-selected rules regarding fractional reserve levels).

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The account is necessarily incomplete, prone to technical errors (though it has been reviewed for technical accuracy by experts), and, again, could likely soon be out-of-date as different projects described here fail or succeed. Or, the entire Bitcoin and blockchain technology industry as currently conceived could become outmoded or superseded by other models.
The underlying sources of this work are a variety of information resources related to Bitcoin and its development. The principal sources are developer forums, Reddit subgroups, GitHub white papers, podcasts, news media, YouTube, blogs, and Twitter. Specific online resources include Bitcoin industry conference proceedings on YouTube and Slideshare, podcasts (Let’s Talk Bitcoin, Consider This!, Epicenter Bitcoin), EtherCasts (Ethereum), Bitcoin-related news outlets (CoinDesk, Bitcoin Magazine, Cryptocoins News, Coin Telegraph), and forums (Bitcoin StackExchange, Quora). Other sources were email exchanges and conversations with practitioners in the industry as well as my experiences attending conferences, Bitcoin workshops, Satoshi Square trading sessions, and developer meetups.

If you are a business owner and just want to accept bitcoins, you can fill your wallet by publishing a Bitcoin address and requesting that customers send funds to that address.
Mining, the means by which bitcoins are initially put into circulation, provides another way of obtaining bitcoins. When mining, you get paid bitcoins to run a computer that processes transactions for the bitcoin network. Mining will be discussed more in Chapter 9.
* * *
Figure 2.2: The "Receive coins" tab of the Bitcoin-Qt client where you can manage your addresses.
* * *
2.3 Sending Payments
Once you have bitcoins in your wallet, you will be able to see the balance in your wallet on the Overview tab of the Bitcoin client. You can then use the Bitcoin client to send funds to any other Bitcoin user. All you need is one of their addresses.

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Bitcoin Stack Exchange, May 8, 2012. http://bitcoin.stackexchange.com/questions/3600/why-are-bitcoin-addresses-hashes-of-public-keys
[24] Raulo, "Optimal pool abuse strategy," February 4, 2011. http://bitcoin.atspace.com/poolcheating.pdf
Notes
1Monetary inflation is a sustained increase in the supply of money, which typically results in price inflation. It is a serious risk factor for fiat currencies because governments often produce money excessively, causing perpetual price inflation.
2The creator of Bitcoin defines a bitcoin as a "chain of digital signatures" in the public ledger known as the block chain.[1]
3The Bitcoin source code can be found at https://github.com/bitcoin/bitcoin
4According to the Bitcoin Wiki, the second biggest bitcoin based company is the underground drug website known as the Silk Road.[3] The sales figures were estimated by Carnegie Mellon computer security professor Nicolas Christin.[4] Six of the other businesses in the top 20 largest are gambling related.[3]
5The chart is from bitcoincharts.com
6See https://en.bitcoin.it/wiki/Tor
7These are foreign exchange fees, not Bitcoin transaction fees (which are much smaller).
8There is a 1 in 4.29 billion chance that a mistyped address passes the checksum test.

Early adopters have tended to hold on to bitcoin as they hold on to gold, hoping that its value will increase in the long run, and therefore treating bitcoin as an asset rather than as a medium of exchange. According to economic theorists, low or no inflation motivates holders to hoard rather than spend their bitcoin. Still, if more trusted bitcoin exchanges facilitate consumers’ movement in and out of bitcoin, then the frequency and volume of trading could increase. If more merchants accept bitcoin as a medium of payment, then people who’ve been sitting on bitcoins may start to use their store for purchases, thereby freeing up more bitcoins. If merchants begin to issue bitcoin-denominated gift cards, then more people should be exposed to cryptocurrencies and become more comfortable transacting in bitcoin. And so, hypothetically, people will have fewer reasons to hoard bitcoin.

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And so, hypothetically, people will have fewer reasons to hoard bitcoin. Advocates of the bitcoin protocol argue that, because bitcoins are divisible to eight decimal places—the smallest unit is called a Satoshi, worth one hundredth of a millionth of a bitcoin—the smallest denominations will buy more if demand for bitcoin increases. There’s also the possibility of tweaking the protocols to allow for greater divisibility, say, picopayments (trillionths of a bitcoin) and to remine stranded bitcoin after a period of dormancy.
A fifth dimension is high latency: for the bitcoin blockchain network, the process of clearing and settling transactions takes about ten minutes, which is far faster end to end than most payment mechanisms. But clearing transactions at the point of sale instantaneously is not the issue; the real problem is that ten minutes is simply too long for the Internet of Things where devices need to interact continuously.

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Buying Art Through the Bitcoin Blockchain: How It Works
To purchase the piece, Don opened his bitcoin wallet app. He used it to create a message that specified the amount of bitcoin representing the purchase price of the piece, designated Artlery’s public key as the recipient of that bitcoin, and used his private key to “sign” or authenticate the message. Don double-checked all the fields because, unlike traditional payment methods, there was no reversing this bitcoin transaction. Then he broadcast the message not to his Canadian bank but to the entire network of computers running the full bitcoin blockchain.
Some people refer to these computers as nodes, where some nodes are donating their processing power to solve the math problem associated with creating a block. As we’ve explained, the bitcoin community refers to them as miners and to their problem-solving work as mining, as in gold mining.

Prominent economist Nouriel Roubini sent out a string of tweets attacking the notion that Bitcoin is a currency. As Roubini tweeted: “Apart from a base 4 criminal activities, Bitcoin is not a currency as it is not a unit of account or a means of payments or store of value.” He went on to explain his rationale in further tweets: “Bitcoin is not a unit of account as no price of goods and services is set in Bitcoin unit nor it ever will. So it isn’t a currency.” “Bitcoin isn’t a store of value as little wealth is in Bitcoin and no assets in it. Also given price volatility it is a lousy store of value.” “Bitcoin isn’t means of payment as few transactions in Bitcoin. And given its volatility all who accept it convert it right back into $/€/¥.”
Roubini went even further, calling Bitcoin a scam and a fringe movement: “So Bitcoin isn’t a currency. It is btw a Ponzi game and a conduit for criminal/illegal activities.

Nevertheless, I have invested in Bitcoins and suggest you do too, as it is very likely that they will be a major store of value for years to come in the near term.
Bitcoin’s timeline[29]
2008–2009
In 2008, Satoshi Nakamoto posted a paper describing the Bitcoin protocol on the internet.
In 2009, the Bitcoin network came into existence with the release of the first open source Bitcoin client and the issuance of the first Bitcoins.
2010
The prices for the first Bitcoin transactions were negotiated by individuals on the Bitcointalk forums. One notable transaction involved a 10,000 BTC pizza.
On 6 August, a major vulnerability in the Bitcoin protocol was spotted. Transactions weren't properly verified before they were included in the transaction log or "block chain" which allowed for users to bypass Bitcoin's economic restrictions and create an indefinite number of Bitcoins
On 15 August, the major vulnerability was exploited.

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The most recent attempt to provide a good alternative that gained significant traction is Bitcoin. Bitcoin is a digital currency designed to be controlled through encryption rather than a centralised authority. Operating in exactly the same way as cash, Bitcoins are fully exchangeable as an anonymous form of currency in real-time across the internet and, shortly, at Point-of-Sale.
The core features of Bitcoin are that they can be:
Sent to anyone with a Bitcoin address;
Accessed from anywhere with an Internet connection;
Anybody can start buying, selling or accepting Bitcoins regardless of their location;
Completely distributed with no bank or payment processor between users (this decentralization is the basis for Bitcoin’s security and freedom); and
Transactions are free (for now, this will change).
Bitcoin is a fully encrypted, digital currency which, when you have some, can be used globally as easily as cash.

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In late-2011, the exchange rate of Bitcoin crashed from over $30 in June to below $2 in October.
In January 2012, Bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wife in the third season episode "Bitcoin for Dummies". The host of CNBC's Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider Bitcoin a true currency, saying “There’s no central bank to regulate it; it’s digital and functions completely peer to peer.”
In October 2012, BitPay reported having over 1,000 merchants accepting Bitcoin under its payment processing service.
2013
In February 2013, the Bitcoin-based payment processor Coinbase reported selling $1 million in Bitcoins in a single month at over $22 per Bitcoin.
In March, the US government’s Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for "decentralized virtual currencies" such as Bitcoin, classifying American "Bitcoin miners" who sell their generated Bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations.

No one person or group is in charge of Bitcoin: everyone is.
Bitcoin was introduced to the world in 2009 via a public post on an exclusive emailing list for cryptographers. It quickly developed a following, and soon became the currency of choice for the online drugs market Silk Road. A growing number of people started to exchange Bitcoin for dollars, which pushed its exchange rate from under $0.001 in October 2009 to $100 in April 2013. In October that year, a US Federal Reserve spokesman hinted that Bitcoin might one day become a ‘viable currency’, and the following month the value of a single Bitcoin jumped to over $1,000. Millions of dollars’ worth of Bitcoin are now traded every day. In some parts of the world you can live almost entirely on Bitcoin.
Bitcoin’s dramatic rise to prominence resulted in an explosion of investment, exchange companies, and even ATM machines.

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Although Amir’s technical know-how and experience are admired, his ideals and motivations have put him on the fringes of what has become an increasingly respectable Bitcoin community. Dark Wallet has pitted itself directly against organisations seeking to capitalise and control Bitcoin and its market. ‘Many prominent Bitcoin developers are actively in collusion with members of law enforcement and seeking approval from government legislators,’ reads the Dark Wallet blurb. ‘We believe this is not in Bitcoin users’ self-interest, and instead serves wealthy business interests that make up the self-titled Bitcoin Foundation.’ In a 2014 interview with Newsweek, the chief Bitcoin Foundation scientist, Gavin Andresen, said that he thinks of Bitcoin as ‘a just-plain-better, more efficient, less-subject-to-political-whims money. Not as an all-powerful black-market tool that will be used by anarchists to overthrow the System.’

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He is frequently offered lucrative jobs in the tech sector, but lives instead in what he calls a ‘techno-industrial colony’ in Calafou, Spain. He’s been working on Bitcoin software day and night for over four years now, and arguably knows more about this strange new currency than almost anyone else alive. He is here to tell us about his latest Bitcoin project – something he calls the ‘Dark Wallet’.
The reason Amir and so many others like him are excited by Bitcoin is that it’s a form of internet money with potentially far-reaching consequences. A Bitcoin is nothing more than a unique string of numbers. It has no independent value, and is not tied to any real-world currency. Its strength and value come from the fact that people believe in it and use it. Anyone can download a Bitcoin wallet on to their computer, buy Bitcoins with traditional currency from a currency exchange, and use them to buy or sell a growing number of products or services as easily as sending an email.

Visa has been around, in one form or another, since 1958; if besting a completely unknown competitor by a mere factor of 3,000 is all that it has to show for its half-century head start, that doesn’t strike me as saying a great deal.
19.Zack Whittaker, “Hackers can remotely steal fingerprints from Android phones,” ZDNet, August 5, 2015.
20.Fergal Reid and Martin Harrigan, “Bitcoin Is Not Anonymous,” An Analysis of Anonymity in the Bitcoin System (blog), September 30, 2011, anonymity-in-bitcoin.blogspot.co.uk/2011/07/bitcoin-is-not-anonymous.html.
21.Bitcoin Project. “Protect your privacy,” undated, bitcoin.org/en/protect-your-privacy.
22.An additional complication has to do with the distinction between ASICs and general-purpose computing engines. Unlike the processors in smartphones, tablets, laptops or desktop machines, by definition, an ASIC-based mining rig is optimized for one and only one task: mining Bitcoin. When its utility in this role is at an end, it is useless for anything else. Such devices have among the shortest utilization cycles of any commercial information-processing hardware, at significant environmental cost.
23.See en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power.
24.Charles H.

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London: Penguin, 2008. p. 82 et seq.
5Cryptocurrency
1.It’s important to note that blockchain operations aren’t really distributed in the sense generally meant by “distributed computation,” in which different chunks of a large problem are farmed out to a network of independent processors, and later annealed. The Bitcoin blockchain, by contrast, is replicated identically across all of the network’s nodes. The trade-off is that all of these copies are verifiably identical with one another, at the cost of other advantages of true distributed processing, chiefly speed.
2.As is customary among Bitcoin enthusiasts, in what follows I’ll simply refer to this party—whatever their actual number, gender or nationality—as a presumptively Japanese, presumptively male individual named Satoshi.
3.Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” October 31, 2008, Bitcoin.org/bitcoin.pdf.
4.Very carefully. Joshua Davis notes, in an article for the New Yorker, that the highly regarded security consultant Dan Kaminsky made strenuous efforts to attack the Bitcoin codebase, and found his gambits anticipated and countered at every turn.

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“Banking Blockade,” June 28, 2011, wikileaks.org/Banking-Blockade.html.
7.Hashcash, hashcash.org.
8.David Chaum, “Blind Signatures for Untraceable Payments,” Advances in Cryptology Proceedings of Crypto 82, 1983, pp. 199–203.
9.See Dolartoday, dolartoday.com/indicadores/.
10.In practice, this is not a trivial undertaking. By February 2016, the full Bitcoin blockchain had grown to the point that it weighed in at some 60GB; it took almost a full day for me to download, at typical residential data-transmission speeds, and occupied more or less the entire memory my laptop had available.
11.Bitcoin Project. “Some things you need to know,” undated, bitcoin.org/en/you-need-to-know.
12.My account here is deeply indebted to Chris Pacia’s tutorial, which despite the rather patronizing title is the only one of many Bitcoin explainers I’ve come across that explores this stage of the process in such detail, chrispacia.wordpress.com/2013/09/02/bitcoin-mining-explained-like-youre-five-part-1-incentives/.
13.Among the Bitcoin community, the collapse of the Mt Gox exchange is legendary. See Yessi Bello Perez, “Mt Gox: History of a Failed Bitcoin Exchange,” CoinDesk, August 4, 2015.
14.Jose Pagliery, “The Tipping Point of Bitcoin Micropayments,” CoinDesk, November 15, 2014.
15.Gulliver, “Booking flights with Bitcoin: Taking off,” Economist, February 26, 2015.
16.http://usebitcoins.info/.
17.Pete Rizzo, “Is Bitcoin’s Merchant Appeal Fading?

On a cold early January 2014 evening, Vitalik came down the stairs at Bitcoin Decentral in an old narrow building on Spadina Avenue, an hour prior to the start of one of the weekly Toronto Bitcoin Meetups, organized by Anthony Di lorio. I spoke to him for the first time, trying to understand something that was described to me, as “beyond Bitcoin.” For six months prior to that, I had been trying to understand Bitcoin, and this Ethereum technology was news to me.
Soon after my conversation started, the room was filling with people entering the building, ready for the Meetup to start. There was a special buzz around because Vitalik had just published his white paper1 on a new blockchain platform that was supposed to be better than Bitcoin, and destined to become the next big thing.
Curious and intrigued, I proceeded to bombard Vitalik with questions about Ethereum and its architecture.

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Cryptographic proof is the trusted method that blockchains utilize to confirm the validity and finality of transactions between parties.
The blockchain will redefine the role of existing intermediaries (if they accept to change), while creating new intermediaries, therefore it will disrupt the traditional boundaries of value.
The blockchain has ten characteristics, and they all need to be understood in a holistic manner.
NOTES
1. Bitcoin: A Peer-to-Peer Electronic Cash System, https://bitcoin.org/en/bitcoin-paper.
2. Bitcoin “maximalism” refers to the opinion that solely supports Bitcoin at the expense of all other blockchain or cryptocurrency related projects, because maximalists believe we only a need a single blockchain, and single currency in order to achieve desired network effects benefits.
3. The Untapped Potential of Corporate Narratives. http://edgeperspectives.typepad.com/edge_perspectives/2013/10/the-untapped-potential-of-corporate-narratives.html.
4.

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Banks should not only see the blockchain as a cost savings lever. It is very much about finding new opportunities that can grow their top line.
WHY CAN'T THERE BE A GLOBAL BANK?
To a skeptic, it sounds like a rhetorical question, given that Bitcoin was destined to become the underpinning nerve for a new type of global financial system that is borderless. Bitcoin’s vision is a globally decentralized money network with users at the edges of it.
We should ask the question—since Bitcoin is global and universal, why is not there a truly global Bitcoin bank?
This is a tricky question, because Bitcoin’s philosophy is about decentralization, whereas a bank is everything about centrally managed relationships. However, a global bank with no restrictions on borders or transactions would be interesting to users that want to conduct global transactions wherever they are in the world with the same ease as using a credit card.

pages: 275words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives)
by
David Birch

Whether this is true or not, there is no clear evidence that Bitcoin (despite the media attention) is being used at all. While the public debate around Bitcoin has, from the earliest time, focused on the supposed anonymity of the payment system and therefore its use for black market purchases (Greenberg 2011), detailed analysis of data from the Bitcoin system by the Federal Reserve has shown that it has barely been used at all for payments for goods and services (let alone for guns and drugs), and further that the pattern of circulation of Bitcoins and the dynamics of the exchange rate are consistent with low usage of Bitcoin for retail transactions (Badev and Chen 2014). Despite the widespread interest, Bitcoins do not seem to be gaining much traction in the ‘real world’ of payments.
Wait? Bitcoin?
Bitcoin is a decentralized, peer-to-peer means of exchange.

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To return to Mervyn King’s point about money being a ‘particular historical institution’ (King 2016b), there is no reason why money should continue to work the way it does in response to continuing technological change, and no reasonable person would expect it to.
Is Bitcoin the future of money?
If Bitcoin is not money now, might it be the future of money? I think not: Bitcoin is not the future of money, and the future of money is not Bitcoin. Why the interest then? A reasonable conjecture is that the interest in Bitcoin points to a latent demand for change and, usefully, generates and focuses debate about current monetary structures (Jansen 2013). Much of the interest isn’t, therefore, specifically in Bitcoin, to my mind, but rather in the feasibility of an alternative to the state-issued, interest-bearing fiat currency money system that has been in place for the last forty years. If that interest helps to facilitate debate about what society wants from money in the future, that is very helpful, but it does not imply that Bitcoin satisfies whatever requirements might emerge from that process.

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Bitcoin is a decentralized, peer-to-peer means of exchange. If you have a Bitcoin, which is just a string of numbers, you can send that Bitcoin (or a subdivision of it) to anyone else. (If you want to understand how Bitcoin works, a good place to start is the original paper on the topic: ‘Bitcoin: a peer-to-peer electronic cash system’ by ‘Satoshi Nakamoto’.) I’m no expert on cryptography but there’s no reason I know of to question the basic idea: use a computationally difficult challenge to create strings of bits that it’s hard to make but easy to copy, then use digital signatures for transactions. I get my Bitcoin (a string of bits) and then to transfer them to you I add a digital signature and send them to you. Every time we do a transaction, we tell (essentially) everybody else that the bits now belong to you. The closest analogy to this – one that I used in my previous book – is the stone currency of the island of Yap in the South Pacific, as described by Milton Friedman (Friedman 1991).

This is a transaction database shared by all nodes participating in the system.
25 But unlike credit and debit card transactions, where the bank or card company manages the ledger, Bitcoin ledgers consist of block chains.
26 See https://www.casascius.com/.
27 For example, on April 15, 2013, an Asus laptop was available for 6.2271 BTC, which the website states was equivalent to US$629 (see https://www.bitcoinstore.com/).
28 See “Bitcoin takes an important step toward becoming part of every web browser on the planet,” http://qz.com/78014/bitcoin-is-now-part-of-the-web-sort-of/, accessed May 10, 2013.
29 Around 70 percent of items sold on Silk Road are drugs; other items include erotica, books, and fake IDs.
30 See http://www.bloomberg.com/news/2013–04–12/virtual-bitcoin-mining-is-a-real-world-environmental-disaster.html.
31 See http://krugman.blogs.nytimes.com/2013/04/12/adam-smith-hates-bitcoin/?smid=tw-NytimesKrugman&seid=auto.
32 See http://www.youtube.com/watch?v=wYHoE21kUcs.
33 One version of Bitcoin malware used Skype to turn infected computers into “slaves” of a Bitcoin generator (see http://www.securelist.com/en/blog/208194210/Skypemageddon_by_bitcoining).
34 The December 2013 crashes were linked to new Chinese government restrictions on Bitcoin transactions, see “China Bans Banks from Bitcoin Transactions,” Financial Times, December 5, 2013. China has the largest market in Bitcoins. Other major falls in Bitcoin’s value occurred from June 8 to 12, 2011 (when the price fell by 68 percent), on January 17, 2012 (36 percent), from August 17 to 19, 2012 (51 percent), between March 6 and 11, 2013 (33 percent), and on April 10, 2013 (61 percent).

…

See Forbes’s “An illustrated history of Bitcoin crashes,” http://www.forbes.com/sites/timothylee/2013/04/11/an-illustrated-history-of-bitcoin-crashes/.
35 The total value of all Bitcoins in the world exceeded $1 billion for the first time in March 2013.
36 See Slate, “Fool’s Gold,” http://www.slate.com/articles/news_and_politics/view_from_chicago/2013/04/bitcoin_is_a_ponzi_scheme_the_internet_currency_will_collapse.html.
37 “Bitcoin Is No Great Mystery,” see http://socialdemocracy21stcentury.blogspot.ie/2013/04/bitcoin-is-no-great-mystery.html, accessed April 15, 2013.
38 Sociologically, on the other hand, the image we have of the “average” Bitcoin user is rather predictable. According to a Bitcoin users’ survey that ran between February and April 2013 (with 1,087 responses), the “average” Bitcoin user is overwhelmingly male (95.2 percent) (for a discussion of Bitcoin and gender, see Scott 2014), 32.1 years old, libertarian or anarchocapitalist (44.3 percent), nonreligious (61.8 percent), with a full time job (44.7 percent), and is in a relationship (55.6 percent).

…

This is one potential weakness of the system resulting from the hard limit on Bitcoin supply. The other failing—much more widely discussed—is an inevitable function of its success, that is to say, its proneness to bubbles and crashes.
Since its launch, the Bitcoin network has grown rapidly to become the most widely used alternative money system. Various retailers of material goods, music download websites, game providers, gambling sites, software providers, and high-profile online businesses such as WordPress, Reddit, Namecheap, and Mega, accept Bitcoins. The bitcoinstore.com sells a wide range of consumer goods.27 There are Bitcoin gift cards, dedicated payment system and debit cards, and a series of exchanges (such as Bitcoin-Central and Bitcoin-24.com) in which Bitcoins can be traded for major currencies in real time.

It is addressing the problem of how people can transact securely without a central mediator and do so anonymously. And Bitcoin is most assuredly secure. For the record, the much-publicized bitcoin robberies and cyberattacks have been on some of the bitcoin exchanges and online wallet systems—one of them adapted from a gaming Web site that was never intended to secure banking records.36 Even so, they have nothing to do with the Bitcoin blockchain itself, which is, for all intents and purposes, impenetrable.
Bitcoin’s failure to overcome our business culture’s bias for hoarding and scarcity may be a temporary setback, or it could prove to be a fundamental flaw in the way the system was designed. The Bitcoin blockchain generates an arbitrarily limited supply of bitcoins. It may have been meant to counteract what sometimes seems like the profligate pumping of money into the economy by central banks.

…

This is a money system that works through protocols—digital handshakes between peers—instead of establishing security through central authorities.
Bitcoin is based on a database known as the “blockchain.” The blockchain is a public ledger of every bitcoin transaction ever. It doesn’t sit on a server at a bank or in the basement of a credit-card company’s headquarters; it lives on the computers of everyone in the Bitcoin network. When bitcoins are transacted, an algorithm corresponding to that transaction is “published” to the blockchain. The algorithm is just a description of the transaction itself, as in “2 bitcoins came from A and went to B.” Instead of a list of users and their bitcoin balances, the ledger simply lists the transactions in chronological order. It doesn’t follow people, it follows the money. It’s not a record of how much you have as much as a record of where the money came from and where it is going to.30, 31
To get a transaction into the ledger, two users must first agree to the exchange.

And so, for a year, the idea sat on a shelf in Ross’s mind.
That was, until now. Ross had come across a technology that had recently emerged called Bitcoin. It was being billed as a new form of digital cash that was, from the research he had done, completely untraceable. Anyone in the world could use it to buy and sell anything without leaving digital fingerprints behind.
The people (or person) who had created this new technology were anonymous, but the idea was simple: While you needed dollars to buy things in America, pounds in England, yen in Japan, or rupees in India, this new Bitcoin currency was meant to be used all around the world and specifically on the Internet. And just like cash, it was untraceable. To get some Bitcoins, you could exchange them online in the same way you could go to the airport and exchange dollars for euros.

…

And there, for sale on the Silk Road, were the magic mushrooms Ross had grown a few months earlier, listed for sale as if he were hawking a used bicycle or a box of Girl Scout cookies on Craigslist.
He then explained how to buy Bitcoins, the currency needed to buy drugs on the site. It was like buying coins at a video arcade. You exchanged your cash for tokens, and then you got to play. Just as at an arcade, at the end of the day, no one knew who had used those tokens because they all looked the same. (Bitcoin wasn’t just meant for illegal purchases, either; you could use the digital cash to buy things on dozens of legitimate Web sites around the world.)
“Give me your credit card,” Ross said as he navigated to an online Bitcoin exchange, where Julia could interchange her real dollars for digital gold. They typed in her credit card information and watched as the page loaded.

…

Unlike seizing some contraband at a port or orchestrating a controlled delivery in the street to arrest someone, online drugs were a true Wild West with no existing protocols. It took several layers of approval, numerous meetings, and copious paperwork before Jared was finally allowed to commence his binge-shopping on the Amazon of drugs.
Then there was the challenge of buying the Bitcoins. He was allocated $1,001 for his shopping excursion. So he took the cash, deposited it in a bank, then went to a Bitcoin exchange Web site where he could swap the dollars for Bitcoins. It wasn’t as easy as picking up drugs with cash on the street or finding a used bicycle on Craigslist, but it was still surprisingly painless considering what he was buying.
During his first expedition to the Silk Road, Jared had three goals. The first was to trace drugs back to their dealers. The second was to match listings on the Web site to actual physical drugs and packaging, enabling him to build a profile of what mail from the Silk Road looked like, as he had done with the khat back at Customs and Border Protection.

The right place to start is by understanding Bitcoin.
Understanding Decentralized Peer-to-Peer Exchange
In the simplest possible terms, bitcoin is a digital currency. (I refer to the currency using lowercase “b,” and the platform, technology, or ecosystem using uppercase “B.”) You can acquire bitcoin by exchanging it for your dollars, euros, or yen, by providing someone with a product or service that they pay you for in bitcoin, or by “mining” bitcoin (more on this later). Your acquisition and subsequent possession of this bitcoin exists as one or more entries in a public ledger (the blockchain) in which you are identified by a secure anonymized “key.” Each time you use your bitcoin, the new transaction is recorded as yet another entry in the ledger.
A lot of the attention paid to Bitcoin has focused on its success in creating currency without a government backer, about how bitcoin value measured in traditional money fluctuates a lot over time (although its exchange rate has stabilized considerably in 2015), and perhaps also about the use of bitcoin for commerce that many governments consider illegal.

…

A lot of the attention paid to Bitcoin has focused on its success in creating currency without a government backer, about how bitcoin value measured in traditional money fluctuates a lot over time (although its exchange rate has stabilized considerably in 2015), and perhaps also about the use of bitcoin for commerce that many governments consider illegal. Instead of rehashing those topics, I focus here on thinking about Bitcoin as one of many applications of a new set of enabling technologies. I also discuss two other related applications: OpenBazaar and La’Zooz. Through this discussion, some of the key elements of the economics and technology of decentralized peer-to-peer marketplaces will become more transparent.
Bitcoin
Many of the critical pieces of a decentralized peer-to-peer market are part of Bitcoin. Let’s say that you want to send your friend Clay digital money.

…

Furthermore, a ledger that has to be distributed across every client can grow awfully large over time, and scalability of blockchain-based applications remains an open question. Payment systems like Bitcoin, because of the way they delay settlement, may need to be rebuilt to handle the real-time payments that credit cards and mobile payment systems like PayPal manage with ease today. Part of the solution to both of these challenges will come from the creation of a greater fraction of “off-the-book” transactions, but this creates a new layer of intermediation. Off-the-book transactions also create new risks. Some of you may recall Mt.Gox, the exchange that held its users’ bitcoin in its own centralized Bitcoin accounts while maintaining a parallel off-the-blockchain system of keeping track of which users had how much bitcoin. Mt.Gox ceased operations in 2014 following the 2013 loss of the equivalent of $450 million of its users’ bitcoin because of what appeared to be a hacker having gained access to its Bitcoin accounts.

Michael Carney, “GitHub CEO Explains Why the Company Took So Damn Long to Raise Venture Capital,” pando.com, June 20, 2013, http://pando.com/2013/06/20/github-ceo-explains-why-the-company-took-so-damn-long-to-raise-venture-capital.
20. “Benevolent Dictator for Life,” Wikipedia, https://en.wikipedia.org/wiki/Benevolent_dictator_for_life.
21. “Crypto-Currency Market Capitalizations,” http://coinmarketcap.com.
22. “Who Controls the Bitcoin Network?,” Bitcoin website, https://bitcoin.org/en/faq#who-controls-the-bitcoin-network.
23. Bitsmith, “Inside a Chinese Bitcoin Mine,” The Coinsman, August 11, 2014, www.thecoinsman.com/2014/08/bitcoin/inside-chinese-bitcoin-mine.
24. “Government as Impresario: Emergent Public Goods and Public Private Partnerships 2.0,” talk given by Nicholas Gruen as part of a luncheon series at the Berkman Center for Internet and Society, January 14, 2014, http://cyber.law.harvard.edu/events/luncheon/2014/01/gruen.
25.

…

Some platforms are of little (or no?) value until they get big enough. Bitcoin figured out how to cross this chasm and how to finance this crossing. The size of the reward for publishing/mining declines over time, going from high to low. Cleverly, Bitcoin paid people who took the most risk—who participated in the beginning—more Bitcoins for mining than to people who did this same task later. Paying more early on attracts people when the platform has the least value. The reward structure effectively borrows value from the future (when an established Bitcoin currency will have value) to finance the infrastructure building of the nascent and risky idea (when there is very little value). This is genius.
Lastly, because what the Bitcoin people have earned will only be valuable if the whole Bitcoin enterprise succeeds, these early participants have every incentive to spread the good word and do what they can to make sure that it does.

…

All of the transactions on the public ledger are there for all to see, and open source. In the potentiality of block-chain visionaries, the most useful programs, contracts, and methods will be the ones that are most copied, eventually becoming standards. The Bitcoin.org website explains how this is accomplished with Bitcoin:
Nobody owns the Bitcoin network.… [It] is controlled by all Bitcoin users around the world. While developers are improving the software, they can’t force a change in the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can only work correctly with a complete consensus among all users. Therefore, all users and developers have a strong incentive to protect this consensus.22
While the block-chain protocol has necessarily evolved over the last six years, the evolution is driven by consensus, with the most suitable and widely adopted changes being the ones that win out over the alternatives.

Miners who
do these two functions—verifying the transaction and recording it
on the blockchain—are then rewarded with bitcoins for their effort.
This is how bitcoins are “mined.” Since the number of bitcoins is
fixed to 21 million, it is like mining the bitcoins out of a reservoir.
Hence the term miner.
Although these series of operations seem relatively straightforward, they include
elements of cryptography, computer science, game theory, and classical economics.
The above breakdown is certainly not enough to pierce the complexities of how
blockchains work, but is portrays how this decentralized and distributed value
exchange system works. More importantly, it helps us realize that the for the first
time since the inception of banking, we now have a system to help us transact
without the aid of banks.
Just as TCP/IP led to the creation of more subject-specific protocols, the advent of
bitcoin has led to the creation of other value exchange protocols.

…

References
Chapter 2
Table A-1 provides a list of books that offer technical and/or business application insights.
All books have been referred to in the writing of this book
Table A-1. Technical and business reference list
Name
Author
Area of focus
Mastering Bitcoin:
Unlocking Digital
Cryptocurrencies
Andreas Antonopoulos
Technical book that gives readers
an understanding of how bitcoin
works. Useful for computer
scientists and advanced readers.
Understanding
Bitcoin: Cryptography,
Engineering and
Economics
Pedro Franco
Technical book that gives
readers an understanding of how
bitcoin works and the economic
implications of the technology.
Useful for students, business
persons, and advanced readers.
Value Web
Chris Skinner
General book that offers a
holistic view of how FinTech
and Blockchain firms are using
technology to create a new internet
of value.

…

While the purpose of the book it to shed more light on the implications of the
widespread use of Blockchain technology, the growing diversity within the currency
space cannot be fully excluded from the discussion. As the blockchain gains more
traction in formal financial circles, its first manifestation in the form of Bitcoin is
increasingly being excluded from the dialogue. This seems to be contrary to the symbiotic
link between the two. What is more surprising is the fact that this tendency to separate
bitcoin from blockchain is a repeat of what happened when the Internet first came
into existence. As banks try to harness the power of the blockchain by creating private
blockchains, we find ourselves witnessing the same execution of events as when private
companies tried to create intranets instead of simply using the Internet.
Whether you are a fan of the bitcoin or the blockchain or both, having a nuanced or
biased view on the subject needs to be developed using the scientific method.

If a large attacker were to control more than half of the verification network, they could generate unlimited BitCoins and destroy the currency by inflation.
It depends on conventional broadband, so is vulnerable to surveillance. BitCoin transactions are public and individual BitCoin holders' transactions can be identified.
It depends on a "digital wallet" held on a computer, which is vulnerable to malware attacks and physical seizure.
The history of money on the Internet and the power of the banking industry suggest that BitCoin will come under serious attack in coming years. We can expect to see the same attacks that we've seen often before:
Financial blockades, prosecutions, and technical attacks on BitCoin exchanges.
Association of BitCoin users with terrorists and child pornographers.
Surveillance of BitCoin transactions to break expectations of anonymity.

…

Cut down one Napster, and a dozen spring up in its place.
Better, the Spider calculates, to buy time and find a way to control BitCoin, and make a profit from it. BitCoin is a surprisingly strong model in some ways, yet it still has several vulnerabilities. It will depend on exchanges for converting BitCoin to other currencies until it gains (if it ever does) a sufficient internal market. BitCoin transactions -- the blockchain -- are essentially public, and it's been shown that you can tie transactions back to individual identities.
Lastly, and most importantly, the whole system depends on a distributed network of "miners," who recalculate transactions, and in the process generate new BitCoin. BitCoin depends on its miners to remain honest. If an attacker controls 51% or more of the miners, they can generate bogus transactions and crash the currency.

…

The same year that e-gold died, its successor popped up in the form of BitCoin, the first credible crypto-currency. While e-gold based its denomination on the tangible value of gold coins, BitCoin is backed by nothing more than mathematics. This has led people to accuse it of being a pyramid scheme, destined for collapse.
BitCoin works by "mining" new coins as a side effect of doing the cryptographic bookkeeping for other people, processing the so-called "transaction chains." In the beginning, when transaction chains were short, they were easy to process, and people could mine thousands of coins on their PCs. Today, as chains are long, it takes more effort to mine coins. Every year, the number of coins that can be mined falls, so at some point there will be no new BitCoins.
The BitCoin design and open source software was written by a prudently anonymous team calling themselves "Satoshi Nakamoto."

Another major concern under a Bitcoin currency standard (or any digital currency) is inflation. It is true that the supply of bitcoins has been capped at 21 million coins, a limit that is expected to be reached sometime in the twenty-second century. Some people worry that this cap will eventually imply deflation, if world growth continues but the supply of bitcoins is fixed. They should be much more worried about inflation than about deflation. How is that? Because Bitcoin does not have a monopoly on the underlying technology, imitators can appear, and indeed they already have. Over time, Bitcoin 1.0’s first-mover advantage may fade, especially if Bitcoin 2.0 or Bitcoin 3.0 offers a superior mechanism (e.g., much lower maintenance costs and more surefire anonymity). If so, the problem will be inflation, not deflation.
Can the government really copy the new technologies to create a superior clearing mechanism for its own electronic currency?

…

Already, markets are forming to exploit this capacity, for example, in applications surrounding Ethereum.4
That distributed-ledger technology could in theory someday produce a superior currency, however, hardly means that the world is already there in practice. One problem is that the value of Bitcoin 1.0 fluctuates wildly (figure 14.1), so it hardly fulfills the function of a stable store of value. In principle, it could become more stable if it gained more widespread monetary acceptance. Figure 14.2 shows that the price of gold in terms of dollars was much more stable under the gold standard, even in real (purchasing-power) terms. Whether this could happen without a government that aimed to stabilize the value of Bitcoin 1.0 is at best a conjecture.
Figure 14.1: Market price of bitcoins (US dollars). Source: Blockchain.info.
Figure 14.2: Real gold price (US dollars). Source: 1850–1920, National Mining Association; 1921–2015, Bloomberg.
Another major concern under a Bitcoin currency standard (or any digital currency) is inflation.

…

The basic idea, in a nutshell, is to create a system in which diverse private-sector individuals (or entities) are incentivized to maintain independent ledgers of transaction trees (or blockchains), and new transactions cannot clear the books without achieving a critical mass of third-party acceptance. A fair dose of encryption technology is also included, and in Bitcoin, for example, individuals are allowed to use aliases with passcode-protected accounts to make it difficult to determine their identities. A lot of truly fascinating science supports the different systems, and one can find many excellent treatments.2
Governments around the world have already begun regulating cryptocurrencies more aggressively. In the United States, Bitcoin wallets must now comply with anti-money-laundering rules, and the Internal Revenue Service has begun to issue rulings on how Bitcoin earnings should be taxed. The European Union, too, is in the process of intensifying its regulations. Where governments have the greatest leverage is in regulating how financial institutions interact with cryptocurrencies.

This means it must mediate exchanges of physical goods and services and be a store of value that can make claims on those goods and services. In other words, in order to convince people to take Bitcoins as payment, you have to convince them that Bitcoins are worth something and will continue to be worth something in the future.
Many Bitcoin evangelists believe that because it is not created or regulated by the state, Bitcoins are somehow a more stable store of value. This quixotic fixation—little different, in substance, from an older generation of cranks’ obsession with the gold standard—has led the Bitcoin subculture to naïvely recapitulate the unregulated financial systems of the nineteenth century, with all their crises, crashes, swindles, and panics. The wild fluctuations in the currency’s value belie the Bitcoiners’ faith, as does the fact that several prominent Bitcoin exchanges have collapsed and made off with their clients’ wealth, leaving their victims with no recourse, a consequence of the lack of standards and regulation.

…

The authors of the study quipped that Wikipedia had become “the encyclopedia that anyone who understands the norms, socializes him or herself, dodges the impersonal wall of semi-automated rejection and still wants to voluntarily contribute his or her time and energy can edit.”28
Bitcoins, Doges, and Whuffie
A contemporary reader of Doctorow’s book may find that the concept of “Whuffie” resonates more than it used to, because of the renewed prominence of invented nonstate currencies—in particular, the distributed cryptocurrency Bitcoin. As an accounting system that maintains an artificially scarce points system that is nevertheless not tied to the traditional money and banking system, it is of some limited economic interest. But it turns out that Bitcoin, for all its media hype, may be less significant than some other alternative currencies that currently lack its pretentions.
The partisans of Bitcoin aspire for it to substitute for capitalist money. This means it must mediate exchanges of physical goods and services and be a store of value that can make claims on those goods and services.

…

And the same may be true of Dogecoin, which was launched at the peak of both Bitcoin and Doge’s popularity in late 2013. Yet the community that arose around it tells us something important about the real significance of the entire class of alternative moneys.
Measured in terms of its value in US dollars, Dogecoin never threatened Bitcoin. But that was never relevant for the currency’s core use. Within a few months of its inception, there were more daily unique transactions in Doges than Satoshis (as Bitcoins were sometimes called in homage to their mysterious inventor).29 And that’s because Dogecoin satisfied a need for a different kind of currency, far removed from the traditional capitalist sort and in fact more similar to Whuffie.
Technically, Dogecoin and Bitcoin are nearly identical, but that’s a misleading picture of Dogecoin’s significance.

A new kind of currency is making official control of this area even harder. Bitcoin is an electronic cash system, produced using cryptography. It is a peer-to-peer currency, made by users, meaning that no central authority issues money or tracks transactions. For every legal bitcoin user, selling web design services or carrying out coding jobs for which they are paid in the currency, there are many more using bitcoins to buy drugs on the Silk Road. Bitcoin is today the preferred choice of hundreds of online drug dealers. You can buy bitcoins using cash or other currencies in hundreds of ways, with varying levels of anonymity. Using bitcoins can be, depending on how you use them, almost completely anonymous.
Originally, bitcoins were produced by ‘miners’ – a figurative term for computer owners who donated their processor time to the project and were rewarded with coins for their efforts.

…

Liberty Gold is a virtual metal-backed currency from Costa Rica, purchasable automatically from anonymous servers with Western Union cash payments, whereby participants swap the transaction number for invisible currencies which they can then swap into other currencies. You could for a short period in 2011 even buy bitcoin by SMS: users would buy a simcard from Poland, or Belgium, or one of a dozen other countries, charge it with cash, send a text and receive their coins to their handset. ‘Mixing’ services too, can tumble the coins in and out of thousands of other bitcoin transactions and accounts, making a dense web of mathematics even denser still. When most investigators can’t even understand the basics of encryption, the likelihood that they or a jury member will reach an understanding of bitcoin is minimal.
And when most small-scale drug transactions are small, under £100, who’s watching? The answer, so far, is that no one has been busted using evidence from the bitcoin blockchain. Bitcoin addresses, where you receive and store coins, are randomly generated strings of letters and numbers, and there’s no ID check system – and you can create another in moments.

…

The system was then flooded with speculators, forcing MtGox to limit withdrawals to US$1,000 worth of bitcoins a day to stem the flow and prop up the dollar-value of the currency.6
Network analysts Fergal Reid and Martin Harrigan of University College Dublin wrote a 2012 paper baldly titled ‘Bitcoin is Not Anonymous’. In it they demonstrated what the high-tech coining community knew – that the blockchain recorded all transactions. Reid posted in a comment thread following the release of his paper, ‘You don’t get anonymity automatically from the system. A lot of people out there think you do.’7
But the determined user can retain anonymity easily enough in the US at least, by entering a bank and paying cash into an exchanger’s account, for bitcoins are now traded just as dollars and euros are. (They now have a value that is decided by the market. The total bitcoin market capitalization stood at £72 million in November 2012 – with around 10 million coins valued by the secondary market at around £7.50 each.)

pages: 182words: 53,802

The Production of Money: How to Break the Power of Banks
by
Ann Pettifor

It helps create activity – artistic, scientific, practical or therapeutic.
The bitcoin mania
Bitcoins have introduced millions of people to a currency that appeared from nowhere and is, apparently, ‘cryptographic proof’. Whereas private banks can create money by a stroke of the keyboard, the creation of bitcoins involves vast amounts of computer processing power. This power is capable of deploying a complicated algorithm that approximates the effort of ‘mining’ coins.24
The bitcoins so mined have become the new gold and bit-coiners the new goldbugs.
This new currency (which claims to be a commodity) is a form of peer-to-peer exchange. Its life began in the murky world of Silk Road, an online black market on the deep web, and has generated a great deal of excitement. It was created by an unknown computer scientist – the first bitcoin miner. It is now used for international payments, but also for speculative purposes.

…

Like other virtual currencies, bitcoin has theoretical roots in the Austrian school of economics. Its advocates are keen followers of Friedrich von Hayek, and cite as inspiration his book, Denationalisation of Money, in which he calls for the production, distribution and management of money to be left to the ‘invisible hand’, so as to end the oversight of regulatory democracy.25
There are two things striking about this new currency. First, its creators (who are computer programmers) have apparently ensured that there can never be more than 21 million coins in existence. (Although bitcoins can be divided into smaller units: the millibitcoin, microbitcoin and satoshi. Satoshi is the smallest amount, representing 0.00000001 bitcoin, one hundred millionth of a bitcoin.)
Bitcoin is therefore like gold: its value lies in its scarcity.

…

One commentator notes that ‘bitcoin was conceived as a currency that did not require any trust between its users’.26
Equally, its scarcity means that, unlike the endless and myriad social and economic relationships created by credit, the capacity of bitcoin to generate economic activity is limited (to 21 million coins). The currency’s architects deliberately limited the amount of bitcoins in order ostensibly to prevent inflation. In reality, the purpose is to ratchet up the value of bitcoins, most of which are owned by originators of the scheme.
In this sense, bitcoin miners are no different from goldbugs talking up the value of of a finite quantity of gold, from tulip growers talking up the price of rare tulips in the seventeenth century, or from Bernard Madoff talking up his fraudulent Ponzi scheme.
However, some have hyped up the technology used by bitcoin – blockchain, a distributed database or ledger – and argued that it could revolutionise the distribution of wealth and provide transparent accounts of transactions.

Then, on 18 August 2008, a month before the financial crisis broke in earnest, a new domain name was registered anonymously: bitcoin.org. Two weeks later, somebody with the user name ‘Satoshi Nakamoto’ posted a nine-page paper outlining an idea for a peer-to-peer electronic cash system called bitcoin. The bitcoin system went live a few months later, on the day the British government reported its second bailout of the banks, an event referred to by Satoshi, who quoted a headline from The Times in his announcement of bitcoin’s birth. A month later Satoshi announced on the Peer-to-Peer Foundation website: ‘I’ve developed a new open source P2P e-cash system called Bitcoin. It’s completely decentralised, with no central server or trusted parties, because everything is based on crypto proof instead of trust. Give it a try, or take a look at the screenshots and design paper.’ His motivation was clear. Bitcoin was designed to maintain its value without any precious-metal backing, without any centralised issuer, and without any intrinsic value.

…

The price shot up in the wake of the financial crisis in Cyprus in 2013, when private depositors woke up to the fact that their conventional money was not safe in banks, because the government of Cyprus announced that it would seize over 40 per cent of all savings over $100,000. As investors around the world digested the arbitrary power of governments, bitcoin’s price rose from about $120 in September 2013 to almost $1,200 in December of that year. It has since slowly declined.
At the time of writing, about $6 billion worth of money is held in bitcoins. But it is still a long way from taking over as the world’s reserve currency. It does not yet work as a unit of account. The volatility and bubble-like behaviour of bitcoins are not encouraging for a world reserve currency, and nor is its relatively small supply. It is also still not easy to get many traders, even online, to accept bitcoins. The first bitcoin exchange, Mt. Gox, collapsed in a pile of fraud. Moreover, bitcoins have proved very popular with drug dealers, especially via an online exchange called Silk Road.

…

It is hard to get your head around how bitcoin works. One of the pithiest explanations I have come across is in a recent launch by Ethereum, a business built to follow up on bitcoin: ‘The innovation provided by Satoshi is the idea of combining a very simple decentralised consensus protocol, based on nodes combining transactions into a “block” every ten minutes, creating an ever-growing blockchain, with proof of work as a mechanism through which nodes gain the right to participate in the system.’ If you think that’s hard to understand, you are not alone. I have yet to come across a description of blockchain technology in English, as opposed to mathematics, that is really clear. In outline, I know that bitcoin is effectively a public ledger – a compendium of transactions, stored by bitcoin users all over the world.

pages: 390words: 109,870

Radicals Chasing Utopia: Inside the Rogue Movements Trying to Change the World
by
Jamie Bartlett

Afghanistan—and then a similar experience working in Libya with rebels fighting Gaddafi—turned her into a fully committed anarchist who thought state power was the root of most of the world’s problems.17
In 2013 a former US military employee told her about bitcoin, and she immediately thought that it was a way to circumnavigate the state entirely. Bitcoin, which was invented in 2009, is digital cash, just a string of numbers. Anyone can download a bitcoin wallet or QR code on to their computer or phone, buy bitcoins with traditional currency from a currency exchange and use them to buy or sell a growing number of products and services as easily as sending an email. Transactions are secure, fast and free, with no central authority controlling value or supply, and no middlemen taking a slice. You don’t even have to give your real name to start up an account. Bitcoin wrestles control of the money supply away from the state. There is a cap on the total number of bitcoins that can ever be produced: 21 million. New bitcoins are not minted by any central authority.

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New bitcoins are not minted by any central authority. Instead, anyone who dedicates their computing power to verifying the transactions competes to earn a very small number of new bitcoins each time they do so (this is called ‘mining’). As more bitcoins are created (approximately 14 million have been created so far), the remaining bitcoins require more computing power to mine.* The last bitcoin is expected to be mined around 2140.
It wasn’t bitcoin itself that excited Susanne, but the way bitcoin stored information. It works because a copy of every transaction between users is stored on a public, chronologically ordered database, called the ‘blockchain’.18 A copy of that database is hosted on thousands of computers, and new transactions can only be added to that database once they’ve been verified by other computers that check them.

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Many people assume bitcoin to be completely decentralised, but if a miner, or a group of miners, controlled over half the computing power that works on verifying the transaction, it could feasibly force a change on the blockchain transaction list however it wished, create a fork of the blockchain, and all the other computers would start to work on the new version (the protocol is written so that all computers work from the longest blockchain). In bitcoin, a few large pools can register most of the new bitcoin blocks, which could push them to the 51 per cent threshold for mining power: which could result in a takeover. Indeed, in 2014 one mining rig took over 51 per cent of bitcoin’s hashing power for twelve straight hours. One of bitcoin’s goals was to be a free system, independent of anyone’s control. With small pools, no one has this kind of control. There is also an environmental problem. With no other way to establish whether miners are bona fide, the bitcoin architecture forces them to do a lot of hard computing; this ‘proof of work’, without which there can be no reward, insures that all concerned have skin in the game.

The system is designed to ensure no more than twenty-one million Bitcoins are ever generated, thereby preventing a central authority from flooding the market with new Bitcoins. Most people purchase Bitcoins on third-party exchanges with traditional currencies, such as dollars or euros, or with credit cards. The exchange rates against the dollar for Bitcoin fluctuate wildly and have ranged from fifty cents per coin around the time of its introduction to over $1,240 in November 2013.
People can send Bitcoins to each other using computers or mobile apps, where coins are stored in “digital wallets.” Bitcoins can be directly exchanged between users anywhere in the world using unique alphanumeric identifiers, akin to e-mail addresses, and there are no transaction fees. Anytime a purchase takes place, it is recorded in a public ledger known as the “blockchain,” which ensures no duplicate transactions are permitted. Bitcoin is the world’s largest crypto currency, so-called because it uses “cryptography to regulate the creation and transfer of money, rather than relying on central authorities.”

., a trend that is accelerating thanks to new forms of illicit finance that greatly facilitate its clandestine business operations.
Dark Coins
Bitcoin’s got its issues. But it is not competing with perfection.
DAN KAMINSKY, SECURITY RESEARCHER
Technology is enabling new forms of money, and the growing digital economy holds great promise to provide new financial tools, especially to the world’s poor and unbanked. These emerging virtual currencies are often anonymous and none have received quite as much press as Bitcoin, a decentralized peer-to-peer digital form of money. Bitcoins were invented in 2009 by a mysterious person (or group of people) using the alias Satoshi Nakamoto, and the coins are created or “mined” by solving increasingly difficult mathematical equations, requiring extensive computing power. The system is designed to ensure no more than twenty-one million Bitcoins are ever generated, thereby preventing a central authority from flooding the market with new Bitcoins.

Another more direct route, which Topiary often used, was to simply transfer money between a few different Bitcoin addresses:
Bitcoin address 1 → Bitcoin address 2 → Bitcoin address 3 → Liberty Reserve (a Costa Rican payment processor) account → Bitcoin address 4 → Bitcoin address 5 → second Liberty Reserve account → PayPal account → bank account.
If even the hint of a thought occurred to him that there weren’t enough transfers, he would add several more paths.
Then on Monday, June 6, Topiary checked the LulzSec Bitcoin account. Holy shit, he thought. He was looking at a single, anonymous donation of four hundred Bitcoins, worth approximately $7,800. It was more money than Topiary had ever had in his life. He went straight into the core group’s secure chat room.
“WHAT THE FUCK guys?!” he said, then pasted the Bitcoin details.
“NO WAY,” said AVunit. “LOL.

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Topiary started requesting donations for LulzSec and used Twitter and Pastebin to provide the thirty-one-digit number that acted as the group’s new Bitcoin address. Anyone could anonymously donate to their anonymous account if he converted money into the Bitcoin currency and made a transfer. Bitcoin was a digital currency that used peer-to-peer networking to make anonymous payments. It became increasingly popular around the same time LulzSec started hacking. By May, the currency’s value was up by a dollar from where it had been at the start of the year, to $8.70. A few days after soliciting donations, Topiary jokingly thanked a “mysterious benefactor who sent us 0.02 BitCoins. Your kindness will be used to fund terror of the highest quality.”
He used Twitter to drop hints about whom LulzSec would hit next.

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They started private messaging Topiary with their unique Bitcoin addresses so he could send them their shares. Topiary had no intention of keeping quiet about the money or cutting a bigger slice for himself. Everyone was funneling the money through various accounts to keep it from being traced. Who knew if the donation had come from the Feds or opportunistic military white hats?
“Guys be safe with the Bitcoins please,” said AVunit. “Let it flow through a few gateways.…Use one bit to get out of financial trouble and then sit on the rest.”
“Okay, beginning the sends,” Topiary said. “All of you are now $1,000 richer.”
“Excuse me while I light up a victory cigar,” said Pwnsauce.
“I’m just going to stare at it,” said Kayla. “Let it grow as Bitcoin progresses.” So volatile and popular was the value of the Bitcoin crypto currency that by the following day one Bitcoin had risen to $26 in value, making their big donation worth $11,000.

Instead of enabling merchants to process credit card payments from Visa or MasterCard, Bitcoin bypasses the system entirely in favour of device-to-device transactions using near-field communications technology.
Bitcoin’s new currency doesn’t require a third-party processor or a plug-in dongle. Because of this, Bitcoin can afford to charge users much less per transaction. At the moment, the average Bitcoin transaction fee is 0.99 per cent, while Square and PayPal’s processing apps charge 2.75 per cent and 2.7 per cent per swipe of your credit card.
Like any currency, Bitcoins can also be exchanged for US dollars through a processing service. As of 11 April 2011, the going rate was round $4.90 per Bitcoin.
In Africa, where inflation is out of control, many merchants are choosing to hang on to their Bitcoins so that they don’t have to push around wheelbarrows full of $100-billion notes. They’re looking at a rival currency to hold their assets, and it isn’t always the US dollar or euro.

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There’s been a lot of discussion around the fact that Bitcoin’s anonymity enables the facilitation of illegal activities, money laundering and the like. Admittedly it is well suited to such abuse only because it is a totally open and community-regulated currency. However, suspicious transactions will still get flagged by the traditional banking system when cash is put into or taken out of the Bitcoin economy.
So what’s holding Bitcoin back from shaking up the global economy and becoming a true rival currency, especially in the digital payments space?
Security is the main concern. Unlike your credit card or existing bank accounts in the system, Bitcoin currently provides no protection or compensation in the event of fraud. Recently, a hacker managed to raid several Bitcoin accounts around the world and got away with $228,845.20
While current technology would enable tracking of IP activity around trades and the flow of Bitcoins, in the current instance of fraud, the weak link was the Bitcoin exchange, which didn’t have the monitoring tools in place to track the hack.

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“Increasingly, these virtual economies are leading to real money trades,” notes Hunter, one of a handful of academics closely following this trend.
Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. It uses peer-to-peer technology to operate, with no central authority, managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open-source software that enables the use of this innovative virtual currency.
Over the past few years, the peer-to-peer currency it has created has gained a surprising foothold in the global market.
There are now multiple Bitcoin-processing apps for Android and the iPhone, as well as an online payment system similar to PayPal. Instead of enabling merchants to process credit card payments from Visa or MasterCard, Bitcoin bypasses the system entirely in favour of device-to-device transactions using near-field communications technology.

The effect is to make a user’s web-browsing history as good as untraceable, which is handy if you are a political dissident, spy, investigative journalist—or drug dealer.
Then there is the problem of how to pay. For this, there is Bitcoin. The world’s foremost digital currency system, Bitcoin works without a central bank, instead relying on networks of computers to generate new “coins” by performing complex mathematical operations in a process known as mining. Setting up a Bitcoin account is a bit of a hassle, but not particularly complicated and, like the TOR browser, the currency is perfectly legal to use. Bitcoin’s value is ludicrously volatile: its price shot up from less than $15 at the beginning of 2013 to nearly $1,000 in November of that year, before falling back to $300 by the end of 2014. But online shoppers can live with this because, like TOR, Bitcoin provides them with a cloak of anonymity.
The combination of untraceable browsing and anonymous payments has enabled an online criminal market to flourish.

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Others, apparently including Evolution, vanish when the people running them decide to pull a fast one. (Evolution’s managers are thought to have made off with some $15 million in Bitcoin payments kept in escrow when the site mysteriously vanished in 2015.) And all such sites depend on Bitcoin and TOR, both of which could be pulled from under their feet if the governments of the world decided to ban them.
There is no sign of that for now. Germany’s finance ministry has recognized Bitcoin as a currency, meaning its users can be taxed. In the United States, the Winklevoss twins, the nearly men of the dotcom boom who claimed that Mark Zuckerberg had stolen the idea for Facebook from them, have poured money into creating a Bitcoin exchange. Most democratic governments have so far been reluctant to outlaw the TOR browser, on the basis that it has legitimate uses as well as nefarious ones.

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One academic study of the goods for sale on the original Silk Road estimated that about one-fifth of all its listings were aimed at dealers, and that these “business-to-business” transactions accounted for between 31 percent and 45 percent of the site’s trades by value.3 If that is the case, even drug users who buy their supplies “offline,” from a dealer or friend, may well be buying a product that was traded online at an earlier stage in the supply chain.
Measuring the total value of the online drug economy is hard, not least because Bitcoin’s price is so volatile. The FBI originally estimated that the Silk Road had done $1.2 billion in business during its two and one-half years online. But it later scaled down this rough calculation: the estimate had been made when Bitcoin’s value was near its peak, whereas much of the Silk Road’s business was done when the digital currency was less valuable. The FBI did a revised estimate, using the currency’s varying value at the time that each different trade was made, and came up with the much lower figure of $200 million.

A decentralised world that is both private and impossible to censor.
Back in 2009, in an obscure cryptography chat forum, a mysterious man called Satoshi Nakamoto invented the crypto-currency Bitcoin.fn3 It turns out the real genius of Bitcoin was not the currency at all, but the way that it works. Bitcoin creates an immutable, unchangeable public copy of every transaction ever made by its users, which is hosted and verified by every computer that downloads the software. This public copy is called the ‘blockchain’. Pretty soon, enthusiasts figured out that the blockchain system could be used for anything. Armed with 30,000 Bitcoins (around $12 million) of crowdfunded support, the Ethereum project is dedicated to creating a new, blockchain-operated internet. Ethereum’s developers hope the system will herald a revolution in the way we use the net – allowing us to do everything online directly with each other, not through the big companies that currently mediate our online interaction and whom we have little choice but to trust with our data.

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The first thing that strikes you on signing up on these market sites is how eerily familiar they all feel – they’re just like eBay or Amazon. Every one of the thousands of products on offer has a detailed description, a photograph and a price. All products and vendors are rated out of five by buyers, who also provide detailed written feedback. There are customer service buttons and shopping carts and free-package-and-delivery and one-off specials. I, like thousands of others, placed an order; paid with bitcoin; and waited for my product to arrive in the post. Which it did, bang on time. The hardest thing is deciding what to buy, since there is an unbelievable choice of products on offer. The Silk Road 2.0 (which was closed by the FBI and other police forces in late 2014) was an anonymous market for anything, with few exceptions, which meant wares stretched from the mundane to the bizarre: listings I spotted on one visit included a complete box-set of The Sopranos and a hundred-dollar Marine Depot Aquarium Supplies voucher.

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I became the moderator of an infamous trolling group and spent weeks in forums dedicated to cutting, starving or killing yourself. I explored the labyrinthine world of Tor Hidden Services in search of drugs, and to study child pornography networks. I witnessed online wars between neo-Nazis and anti-fascists on popular social media sites, and signed up to the latest porn channels to examine current trends in home-made erotica. I visited a Barcelona squat with anarchist Bitcoin programmers, run-down working men’s clubs to speak to extreme nationalists, and a messy bedroom to observe three girls make a small fortune performing sexually explicit acts on camera to thousands of viewers. By exploring and comparing these worlds, I also hoped to answer a difficult question: do the features of anonymity and connectivity free the darker sides of our nature? And if so, how?
The Dark Net is not an effort to weigh up the pros and cons of the internet.

Today, the most talked-about model for an all-digital currency is Bitcoin, a system based on the algorithmic creation of money mined from computation much as gold was once mined from the hills of California. Bitcoin’s most appealing property is that it is not controlled by any government. It is meant to be free from political pressures, from the influence of central bankers, and from the risk of national default. If you’re an Indonesian farmer or an Estonian cabdriver, the thinking goes, better to store your money in BTC than local cash. Bitcoin is easy to keep and transmit, and Bitcoin transactions can be made anonymously—which has attracted drug lords and tax evaders and bred a Bitcoin-fueled black-market economy too.
Bitcoin or something like it will have a role in our future, but another kind of digital currency will appear too, and it will form itself into a kind of gateland.

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Bitcoin or something like it will have a role in our future, but another kind of digital currency will appear too, and it will form itself into a kind of gateland. Instead of being anonymous, backed only by algorithms, and unlinked to a government, as Bitcoin is, this currency will be built for reliability, not mystery. Bitcoin transactions are cloaked in secrecy; this new currency will be transparent, traceable. Bitcoin is free from government interference; this digital currency will be backed by a major government and tied intimately into policy and credit. Imagine that the United States began to issue Bitdollars—traceable, controllable digital currency backed by the security of America’s economic position. While many people might still prefer Bitcoins (or Bitrubles or Bityuan), the answer to the question What’s your safety currency? won’t change much just because you put the prefix “Bit” in front of it.

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If you look at a kid with a phone and think strong, you have a feeling for the potential of a network. If you look at an angry, barely educated terrorist wannabe and think junior varsity, you don’t. And, as a result, you may be about to have a very unpleasant surprise. A friend who controls the largest secure Bitcoin vault in the world put it to me once this way: “Platforms mattered once; now it is protocols.” His point was that the pipes and rules connecting the varied systems of our world fundamentally affect the distribution of power. The rules of the Bitcoin block chain or the implications of an addressing protocol such as IPv6 reveal something about how we’ll all connect in the future. They are examples of how the pulling pressure of networks will become operational.
Try this: Ball up your right hand into a fist. Take your left hand and open the fingers wide.

And some admirable characters championing human rights were looking for a money system that would work outside of corrupt or repressive governments, or in places of no governance at all. What they together came up with is Bitcoin.
Bitcoin is a fully decentralized, distributed currency that does not need a central bank for its accuracy, enforcement, or regulation. Since it was launched in 2009, the currency has $3 billion in circulation and 100,000 vendors accepting the coins as payment. Bitcoin may be most famous for its anonymity and the black markets it fueled. But forget the anonymity; it’s a distraction. The most important innovation in Bitcoin is its “blockchain,” the mathematical technology that powers it. The blockchain is a radical invention that can decentralize many other systems beyond money.
When I send you one U.S. dollar via a credit card or PayPal account, a central bank has to verify that transaction; at the very least it must confirm I had a dollar to send you.

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When I send you one U.S. dollar via a credit card or PayPal account, a central bank has to verify that transaction; at the very least it must confirm I had a dollar to send you. When I send you one bitcoin, no central intermediary is involved. Our transaction is posted in a public ledger—called a blockchain—that is distributed to all other bitcoin owners in the world. This shared database contains a long “chain” of the transaction history of all existing bitcoins and who owns them. Every transaction is open to inspection by anyone. That completeness is pretty crazy; it’s like every person with a dollar having the complete history of all dollar bills as they move around the world. Six times an hour this open distributed database of coins is updated with all the new transactions of bitcoins; a new transaction like ours must be mathematically confirmed by multiple other owners before it is accepted as legitimate.

It may be tempting to belittle alternative currencies as limited, unrealistic, or maybe a little hippie-ish, but they do work, so long as they don’t run into a counterfeiting problem, and so long as the supply of this money is intelligently controlled so as to avoid inflation (or worse). That’s why Bitcoin’s algorithmic approach to steering the money supply is captivating, although wild fluctuations in its value in the summer of 2011 suggest to some that The Economist is correct: “Bitcoin is technically sophisticated. As a monetary system, it looks primitive.”7
Alternative currencies are at a disadvantage due to their limited connection to the banking system. Credit is money too, after all, but there aren’t really loans out there denominated in Ven or Bitcoin, let alone Kilowatt Cards. Nevertheless, nothing but perception makes the issuing authority of the U.S. government more legitimate than the Ithaca HOURs Circulation Committee.

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Projects like Hub Culture, Bitcoin, and Superfluid are trying to blend the interconnectivity of social networks with alternative currency models (although who knows if they’ll still be around by the time you read this). At Superfluid, users trade in Quids, which, as the website explains, are not dollars. “They’re placeholders for favors.” Hub Culture’s currency, Ven, is an attempt to bridge the divide between virtual currencies and real-world goods and services. People in the network transact in the “local” currency, which is priced from a basket of major sovereign currencies, commodities, and carbon futures. Your Ven can be exchanged for one of the major national currencies based on the same floating exchange rates that govern the value of world currencies against one another. Bitcoin has captured peoples’ imaginations because the money supply is determined by an algorithm, not bureaucrats or economists, and there is a cap to the number of Bitcoins that can be created: 21 million.

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Bitcoin has captured peoples’ imaginations because the money supply is determined by an algorithm, not bureaucrats or economists, and there is a cap to the number of Bitcoins that can be created: 21 million.
Two related experiments are the Wuffie Bank and Serios. Wuffie has tried to set up a currency based on reputation, as determined by an algorithm that measures the influence we have on others via our social networks. Serios is a currency of attention, based on the idea that in the age of information overload, an incoming e-mail loaded with 100 Serios is of more value than one loaded with just five Serios. Or think about the “Like” button on Facebook: when someone clicks this button on an article, product, or online video, she is assigning a tiny additional value that wasn’t there before.5 In the summer of 2011, the publishers of Longshot magazine decided that instead of making readers use a conventional paywall, they would ask for payment in U.S. dollars or by sharing the site with others via social media.

The ratio is still on the money, even today, which is something we can’t claim for state-backed or fiat currency because none of the fiat currencies in the world are backed by the gold standard any more. A new globally networked commercial economy needs a currency to match. Step forward crypto currencies such as bitcoin, which are the next evolution in how we trade.
BitcoinBitcoin was the first fully implemented and distributed crypto currency. It works in much the same way as other emerging crypto currencies. Crypto currencies are simply decentralised electronic cash systems. The ‘money’ is created by using peer-to-peer networking, digital signatures and cryptography to generate a currency. Bitcoins are mined out of a digital network by computers plugged into a system trying to figure out a 64-digit code that unlocks 50 bitcoins at a time. The money, or bitcoins, is generally traded within the system by using specific peer-to-peer software. It’s a lot like BitTorrent client software.

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It’s a lot like BitTorrent client software. All transactions are stored on a publicly distributed database so that the record of transaction is with everyone plugged into the system, rather than in a central storage location. It creates a form of decentralised stability and control in transactions, although the currency itself is highly volatile. A key difference with bitcoin is that the owner of each bitcoin stash is anonymous.
The major advantages of bitcoin
There’s a cap on the amount that will ever be in circulation (21 million) so it can’t be devalued by inserting more into the economy.
There’s no centralised control agency that can destabilise the currency through its economic systems.
It’s pan global and not controlled by a government (like gold).
It’s digitally native and suits the future of commerce.
It can transfer across borders without financial interruptions and fee gouging by existing finance systems.

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Yes, banks don’t own currency, but the reason crypto currencies such as bitcoin are emerging is because of the banks themselves. Their opportunistic fee-taking is a counter move to the lower cost transaction (of all things) world we’re moving towards. Taking advantage of the system they feed off enables new systems to emerge. Banks haven’t provided simplified systems for modern-day digital trade and the net result is that this will eat into one of their revenue streams, another hardly noticeable leak in the industry bucket. It’s a form of system hacking, if you like.
Unstable yet permanent
Yes, bitcoin and crypto currencies are unstable and risky, but they’re in many ways no less stable than other stores of money. While bitcoin fluctuates wildly, its overriding direction is for more users, more traders who accept it and importantly its increasing value on the long-term trajectory.

For instance, if I created: “How Spamgourmet Works,” https://spamgourmet.com/.
So I started using: MaskMe, Abine, Inc., https://www.abine.com/maskme/.
I hoped to buy bitcoins: “FAQ—Bitcoin,” accessed August 21, 2013, https://en.bitcoin.it/wiki/FAQ#How_can_I_get_bitcoins.3F.
Bitcoins can be used on: Adrian Chen, “The Underground Website Where You Can Buy Any Drug Imaginable,” Kotaku.com, June 1, 2011, http://kotaku.com/5805928/the-underground-website-where-you-can-buy-any-drug-imaginable.
In May 2013, Kashmir Hill: Kashmir Hill, “Living on Bitcoin for a Week: The Journey Begins,” Forbes.com, May 1, 2013, http://www.forbes.com/sites/kashmirhill/2013/05/01/living-on-bitcoin-for-a-week-the-journey-begins/.
A digital cash start-up, E-gold: United States Department of Justice, “Digital Currency E-Gold Indicted for Money Laundering and Illegal Money Transmitting,” press release, April 27, 2007, http://www.justice.gov/opa/pr/2007/April/07_crm_301.html.

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I decided to try to find a more anonymous currency.
I hoped to buy bitcoins, a virtual digital currency that was all the rage in the hacker community. But I couldn’t find a place that would let me buy bitcoins with a credit card. They all wanted my bank account number or a wire transfer—apparently because people often call their credit card company complaining that they didn’t receive their virtual coins.
Bitcoins can be used on online “black markets” that can sell drugs and weapons. However, some brick-and-mortar businesses have started accepting bitcoins. In May 2013, Kashmir Hill, a reporter for Forbes, lived for a week only on bitcoins—subsisting mostly via a food delivery service in San Francisco that accepted the currency.
However, all Bitcoin transactions are logged and publicly viewable. People’s names are not attached to their transactions, but a determined investigator could likely identify people behind certain Bitcoin transactions.

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People’s names are not attached to their transactions, but a determined investigator could likely identify people behind certain Bitcoin transactions. This was not the anonymity I was seeking.
* * *
The deeper I looked at anonymous digital transactions, the less I liked them. They seemed to be havens for criminals.
In 2007, a digital cash start-up, E-gold, was charged with money laundering. The indictment said the company knew that its services were used by identity thieves, child pornographers, and other criminals. The following year the company and its owners pleaded guilty to money laundering. And in 2013, federal prosecutors shut down the anonymous online currency exchange Liberty Reserve, charging that it was a $6 billion money-laundering operation for child pornographers and other criminals.

If you’re wondering what Norway and Venuezuela have in common, the answer is nothing, except lots of oil.
bitcoin An unregulated currency, created by someone or someones calling him, her, or themselves Satoshi Nakamoto, in 2008. It has no inherent value, so its worth depends entirely on the trust people have in it: in my view, that’s the most interesting thing about bitcoin, the fact it is a built-in lesson on the arbitrary nature of money values. Bitcoins are created by “mining,” i.e., by long slow computer calculations, and are stored and exchanged via digital “wallets.” This number crunching burns a lot of energy, and the cost of that energy is the real cost of creating bitcoins. The currency’s main use is in buying and selling things anonymously over the Internet, though there are also a few cafés and bars that take them.* The value of the bitcoin has gone up and down sharply in its short life.

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.* The value of the bitcoin has gone up and down sharply in its short life. I’m writing this in March 2014: in the last few months the bitcoin has hit a high of over $1,200 and a low of $50. The currency lost 40 percent of its value in a single day, on 2 October 2013, when the FBI seized an illegal exchange called the Silk Road, where payment was taken in bitcoins—though it should be stressed that there is nothing illegal about bitcoins per se. In essence the bitcoin is (to quote the Economist) “a giant shared transaction ledger recording who owns each individual unit of the currency at any one time,” in which all transactions taking place in the currency are simultaneously visible to all its users. An interesting feature of the currency is how transparent it is: all bitcoin transactions are visible, though also anonymous—the combination of those two things is unusual.†
Black-Scholes The name of the formula that made it possible to create prices in the derivatives markets; before the equation was discovered (or invented, depending on your view of what mathematics does), uncertainties about how probabilities changed made it impossible to create accurate prices for an option over time.

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zombie bank A bank with so many dud assets on its books that it no longer functions as a lender, and at the same time is too big or politically important for anyone in power to admit the truth about its real position. Its condition is a form of living death, hence the name. In the debate between fast and slow zombies, zombie banks are as slow as it gets.
* A list of businesses that take bitcoins is available at www.spendbitcoins.com/places/.
† The current value of the currency is available at www.xe.com/currency/xbt-bitcoin, and the total number of bitcoins in circulation at blockexplorer.com/q/totalbc—today, the number is 11,888,600. Bitcoin’s FAQ, which I strongly recommend to anyone with an interest in the practical or theoretical questions raised by the currency, is at en.bitcoin.it/wiki/FAQ.
Afterword
So what are we going to do with these tools, with this economic language? Where are we heading?
The answer: it’s up to us. The future direction of the world economy is not written in stone, and the same goes for those in the US and the UK and in the developed world more generally.

Quicken and Quickbooks have both had a major impact on traditional accounting firms. Now, similar to Mint for personal finance, Wave Accounting offers 100-percent-free small business accounting, although its real business model is to mine the data buried within those transactions. A little further out, the Bitcoin phenomenon continues to unfold. The smartest five VCs we know are all building or investing in between fifteen and twenty Bitcoin companies each. These investments could prove to be unimaginably disruptive. In fact, Salim believes Bitcoin to be the single biggest technology-enabler of the above list.
Leading Bitcoin investor Brock Pierce frames it thusly: While the Internet is a medium for open communication—on top of which a layer of secure transactions has been attempted with great difficulty—the block chain itself is an ultra-low-cost infrastructure of secure, guaranteed transactions over which all manner of applications can be laid (currency being just one of them).

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CFO – Chief Financial Officer
The finance function, although historically very conservative and cautious, is about to face radical disruption from several technologies, including AI (Deep Learning), sensors and Bitcoin (the underlying block chain protocol in particular).
Key Opportunity Implications and Actions
AI accounting Automatic A/P, A/R software-enabling automatic reminders and payment, automatic tax management, and AIs watching for errant behaviors in transaction flows.
Taxation without borders Governments are getting their act together regarding tax havens, which will likely continue to face ever-closer scrutiny in the coming years.
Digital payment solutions More than 60,000 merchants already accept Bitcoin, which we predict will hit Wall Street in late 2014 and will most likely be mainstream by 2016. This is in addition to the growing impact of Square and PayPal.

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We see a consistent set of steps around disruptive innovation comprising the following:
Domain (or technology) becomes information-enabled
Costs drop exponentially and access is democratized
Hobbyists come together to form an open source community
New combinations of technologies and convergences are introduced
New products and services appear that are orders of magnitude better and cheaper
The status quo is disrupted (and the domain gets information-enabled)
We are seeing this evolution occur in drones, DNA sequencing, 3D printing, sensors, robotics and, certainly, Bitcoin. In each domain, an open source, networked community has sprung up, delivering an accelerated stream of innovation exactly in line with the steps listed above.
The reason “Disruption is the New Norm” is that democratized, accelerating technologies, combined with the power of community, can now extend Christensen’s Innovator’s Dilemma to an unstoppable force.
4. Beware the “Expert”
The old saw that an expert is “somebody who tells you why something cannot be done” is truer than ever before.

A host of alternative currencies are blossoming on the Internet, and one in particular—an open-source project called Bitcoin—appears to be gaining steam. Bitcoin uses peer-to-peer technology to operate with no central authority, allowing anyone to send “money” (the Bitcoin currency) to anyone, anywhere, at any time, and beyond the reach of governments. Bitcoin enlists participants in the community to manage transactions and issue money; the network, rather than a central bank, collectively creates the money. Lest you think Bitcoin is a nerd pipe dream, many companies—even large, publicly traded ones like LaCie—accept Bitcoin as payment.10 In the opinion of the tech entrepreneur and journalist Jason Calacanis, “Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband.”11 Recently, Bitcoin has faced significant setbacks, but it is a promising opening salvo in the advent of alternative, postgovernment currency.

Lest you think Bitcoin is a nerd pipe dream, many companies—even large, publicly traded ones like LaCie—accept Bitcoin as payment.10 In the opinion of the tech entrepreneur and journalist Jason Calacanis, “Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband.”11 Recently, Bitcoin has faced significant setbacks, but it is a promising opening salvo in the advent of alternative, postgovernment currency.
It’s possible now to build some of the structures parallel to the government with very little start-up cost—like revenue collection, for example. As people find the current system of government slow and frustrating, they’ll increasingly turn to the casual opportunities offered by radical connectivity to accomplish many of the same goals, even to the point of using alternative money like Bitcoin. An astonishing range of tools exist that complement and in some ways could replace government if given the opportunity.
The Limits of Small
The groundswell is exciting, but is it an unmitigated good thing? Not really. In some ways, it makes effective governance more difficult. At a meeting of mayors from around the country that I attended, I kept hearing a common refrain: they were drowning in the volume of direct contact with constituents.

Distributed capitalism equals ubiquitous capitalism. That’s the evolutionary logic of networked economics.
In the financial market, Bitcoin already has its own trading indexes where hundreds of millions of dollars are speculated on the electronically networked currency. Digital money like Bitcoin represent a peer-to-peer alternative to centrally controlled currencies like the US dollar or Swedish krona, an alternative in which middlemen and thus banks and banking fees are eliminated. Writing in the New York Times to explain “why Bitcoin matters,” Marc Andreessen—who now is the managing partner of Andreessen Horowitz, a $4 billion Silicon Valley venture fund with $50 million invested in Bitcoin-based startups like the virtual wallet Coinbase—argues that this new digital money represents “a classic network effect, a positive feedback loop.”

…

Writing in the New York Times to explain “why Bitcoin matters,” Marc Andreessen—who now is the managing partner of Andreessen Horowitz, a $4 billion Silicon Valley venture fund with $50 million invested in Bitcoin-based startups like the virtual wallet Coinbase—argues that this new digital money represents “a classic network effect, a positive feedback loop.” As with the Web, Andreessen says, the more people who use the new currency, “the more valuable Bitcoin is for the people who use it.”107
“A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers,” writes Andreessen, predicting the historical significance of this networked currency. “What technology am I talking about? Personal computers in 1975, the Internet in 1993, and—I believe—Bitcoin in 2014.”108
What Silicon Valley euphemistically calls the “sharing economy” is a preview of this distributed capitalism system powered by the network effect of positive feedback loops. Investors like Andreessen see the Internet—a supposedly hyperefficient, “frictionless” platform for buyers and sellers—as an upgrade to the structural inefficiencies of the top-down twentieth-century economy.

…

“The Internet,” Joi Ito, the director of the MIT Media Lab, notes, “is not a technology; it’s a belief system.”14 Everything and everyone are being connected in a network revolution that is radically disrupting every aspect of today’s world. Education, transportation, health care, finance, retail, and manufacturing are now being reinvented by Internet-based products such as self-driving cars, wearable computing devices, 3-D printers, personal health monitors, massive open online courses (MOOCs), peer-to-peer services like Airbnb and Uber, and currencies like Bitcoin. Revolutionary entrepreneurs like Sean Parker and Kevin Systrom are building this networked society on our behalf. They haven’t asked our permission, of course. But then the idea of consent is foreign, even immoral, to many of these architects of what the Columbia University historian Mark Lilla calls our “libertarian age.”
“The libertarian dogma of our time,” Lilla says, “is turning our polities, economies and cultures upside down.” 15 Yes.

pages: 464words: 139,088

The End of Alchemy: Money, Banking and the Future of the Global Economy
by
Mervyn King

In principle, two parties engaged in a transaction could instead settle directly by a transfer of money from one electronic account to another in ‘real time’.
A step in that direction was the creation of bitcoin – a ‘virtual’ currency launched in 2009, allegedly by one or more individuals under the pseudonym of Satoshi Nakamoto. Ownership of bitcoins is transferred through bilateral transactions without the need for verification by a third party (necessary in all other current electronic payment systems). Transactions are verified by the use of a software accounting system accessible to all users.35 The supply of bitcoins is governed by an algorithm embodied in the software that runs the system (with a maximum number of twenty-one million). If you can persuade someone to accept payment in bitcoins, then you can use them to buy ‘stuff’. The price of bitcoins in terms of goods and services, or currencies such as the dollar, is determined in the market.

…

The price of bitcoins in terms of goods and services, or currencies such as the dollar, is determined in the market. Without any public body setting the standard for bitcoins as a unit of account, their price is highly volatile – less than $1 when launched, a peak of over $1100 in December 2013, and back to below $400 in late 2015.36 With no one standing ready to redeem them in terms of any other commodity or currency, bitcoins are a highly speculative investment. They have no fundamental value: their price simply reflects the value that bitcoins are expected to have in the future.
The integrity of the algorithm determining the supply of bitcoins is vital. An indication of what can go wrong when confidence in that process is lost is the fate of a related venture, the auroracoin, a digital currency in Iceland. As an alternative to government-issued paper money, auroracoins were circulated in Iceland by a private entrepreneur in March 2014 through a ‘helicopter’ drop to every citizen listed on the national ID register.

…

The increase of cybercrime is analysed in the 2014 US State of Cybercrime Survey, www.pwc.com/cybersecurity
35 This system, effectively a public ledger of all current and past transactions, is known as the block chain technology.
36 Similar huge swings in prices can be seen in related digital currencies, for example Scotcoins in Scotland.
37 http://auroracoin.org
38 Although, unlike cash, transactions with bitcoins leave a permanent record in the software accounting system, leading commentators such as Brito and Castillo (2013) to describe them not as anonymous but pseudonymous. Money stored as bitcoins can also be stolen by hackers or lost through carelessness, just as cash is vulnerable to theft or loss.
39 Yermack (2013) provides data on the relative volatilities of the prices of bitcoins, gold and the major currencies. The volatility of bitcoins is an order of magnitude higher than the other currencies.
40 Economies of this kind have been discussed by Fama (1980), Hall (1983) and Issing (1999).
41 On money as a unit of account see Doepke and Schneider (2013).
42 Magna Carta, chapter 35, translation of the original Latin of 1215.
43 Hayek (1976).

Among them are the rise of alternative currencies and of virtual or digital currencies such as bitcoin. Digital currencies exist within private peer-to-peer computer networks and are not issued by or supported by any government or central bank. The bitcoin phenomenon began in 2008 with the pseudonymous publication of a paper (by Satoshi Nakamoto) describing the protocols for the creation of a new electronic digital currency. In January 2009 the first bitcoins were created by Nakamoto’s software. He continued making technical contributions to the bitcoin project until 2010, at which point he withdrew from active participation. However, by that time a large community of developers, libertarians, and entrepreneurs had taken up the project. By late 2013, over 11.5 million bitcoins were in circulation, with the number growing steadily. The value of each bitcoin fluctuates based on supply and demand, but it had exceeded $700 per bitcoin in November 2013.

The value of each bitcoin fluctuates based on supply and demand, but it had exceeded $700 per bitcoin in November 2013. Bitcoin’s long-term viability as a virtual currency remains to be seen, but its rapid and widespread adoption can already be taken as a sign that communities around the world are seeking alternatives to the dollar and traditional fiat currencies.
Beyond the world of alternative currencies lies the world of transactions without currencies at all: the electronic barter market. Barter is one of the most misunderstood of economic concepts. A large economic literature is devoted to the inefficiencies of barter, which requires the simultaneous coincidence of wants between the two bartering parties. If one party wanted to trade wheat for nails, and the counterparty wanted wheat but had only rope to trade, the first party might accept the rope and go in search of someone with nails who wanted rope.

The first glimmers of this are already visible. Bitcoins, for instance. It’s a new currency that exists solely in cyberspace and isn’t controlled by anyone. It was invented by an anonymous person or entity named Satoshi Nakamoto. No one may know who—or what—he is, but it’s clear that he doesn’t control the production, management, or value of his creation. Despite halfhearted attempts to regulate or legitimize bitcoins, neither do governments. Or anyone else, for that matter. As long as they can be converted to and from other assets of value—whether legally or illegally anywhere in the world—bitcoins will continue to exist and find adherents. What’s not clear is whether “Nakamoto-san,” whoever or whatever he is, is profiting from the invention. It’s entirely possible that a private stash of bitcoins is growing in value, unseen and in secret.

…

It’s entirely possible that a private stash of bitcoins is growing in value, unseen and in secret. The entity that originated the concept may have billions of dollars in private bitcoins sequestered in an electronic file somewhere. (As of this writing, the total market value of all bitcoins is around $5 billion.) But the potential of the technology underlying bitcoins goes far beyond simple currencies. The concept is now being expanded to include enforceable, unbreakable contracts between anonymous parties.18 So in the future, it’s entirely possible for you to be hired, paid, and fired by someone or something whose identity you don’t know. Why would you tolerate this? For the money, of course.
Computer viruses are another example of feral computer programs. They reproduce and sometimes even mutate to avoid detection. Regardless of how they started out, they often aren’t controlled by anyone.

Would it do more to ground money in a marking fabrication of total debt that is more relevant to economies defined by the paradoxes of Anthropocenic growth?
Speaking of reserve currencies, Bitcoin introduces addressable scarcity not in direct relation to the sum of mined minerals or national currencies, but by the mathematics of solving increasingly difficult problems toward an eventual arbitrary limit of 21 million “coins.” There is much to explore with Bitcoin, blockchains and related initiatives, such as Ethereum, but it is also the monetary platform of choice of secessionist projects for which the metaphysical expulsion of externalities is the paramount program, as important if not more than the disintermediation of central banks. The version of Bitcoin that we have (other currencies may fork or follow) is exemplary of the future-archaic quality of many Stack innovations.

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The smart grid is also a recording medium for the immanent representation of all things, passing through signification, toward enable an angelic harmony of things. See Sol Yurick, Metatron: The Recording Angel (Los Angeles: Semtiotext(e), 1985).
54. The weight of virtual systems is amplified by the weight of virtual systems that monitor and mediate virtual systems. Consider the impact of bitcoin and coin mining. The key innovation is that “the work needed to commit a fraud is set to be higher in electricity costs than the economic benefit derived from it.” See http://www.bloomberg.com/news/2013-04-12/virtual-bitcoin-mining-is-a-real-world-environmental-disaster.html and http://www.computerworld.com.au/article/458439/cloud_real_ecological_timebomb_wireless_data_centres/.
55. The Singularity born of spam is a plot device in Charles Stross, Rule 34 (New York: Ace, 2011).
56. Mark P. Milles, “The Cloud Begins with Coal,” August 2013, http://www.tech-pundit.com/wp-content/uploads/2013/07/Cloud_Begins_With_Coal.pdf.
57.

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It is, as Paul Krugman puts it, “both a 17th century and 21st century currency at once,” a currency mechanism that would freeze the sum total of possible liquid value tokens in the world, now and forever.64 In this regard, for certain persuasions, it is better than magic rocks (like gold) because incrementally more gold can always be mined, allowing rootless cosmopolitans to upset “the natural order” of hierarchical hereditary accumulation. If nothing else, Bitcoin has made money into a general design problem, as it should be, and not just the design of financial products or the look of paper bills, but of vessel abstractions of time, debt, work, and prestige. Better alternatives are needed soon, before today's digital platform currencies are prematurely entrenched in the wrong direction (artificially attenuated to closure and scarcity of the wrong stuff). Bitcoins also appear not only in mathematical space but through the energy-intensive mining of coins using special hardware with names like AntMiner, Minerscube, TerraHash HashCoins, and so on. The math is a function of the processing power of the servers, which is also a function of the amount of energy that a server pulls, which for some custom clusters is tremendous.

The company also [released] a software development kit … that will allow third parties – like university robotics researchers – to create applications for Baxter.”
In “The Robot Reality: Service Jobs Are Next to Go”, Blaire Briody, 26 March 2013, The Fiscal Times, http://www.cnbc.com/id/100592545
Shift 16: Bitcoin and the Blockchain
The tipping point: 10% of global gross domestic product (GDP) stored on blockchain technology
By 2025: 58% of respondents expected this tipping point to have occurred
Bitcoin and digital currencies are based on the idea of a distributed trust mechanism called the “blockchain”, a way of keeping track of trusted transactions in a distributed fashion. Currently, the total worth of bitcoin in the blockchain is around $20 billion, or about 0.025% of global GDP of around $80 trillion.
Positive impacts
– Increased financial inclusion in emerging markets, as financial services on the blockchain gain critical mass
– Disintermediation of financial institutions, as new services and value exchanges are created directly on the blockchain
– An explosion in tradable assets, as all kinds of value exchange can be hosted on the blockchain
– Better property records in emerging markets, and the ability to make everything a tradable asset
– Contacts and legal services increasingly tied to code linked to the blockchain, to be used as unbreakable escrow or programmatically designed smart contracts
– Increased transparency, as the blockchain is essentially a global ledger storing all transactions
The shift in action
Smartcontracts.com provides programmable contracts that do payouts between two parties once certain criteria have been met, without involving a middleman.

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The technology that underpins the blockchain creates trust by enabling people who do not know each other (and thus have no underlying basis for trust) to collaborate without having to go through a neutral central authority – i.e. a custodian or central ledger. In essence, the blockchain is a shared, programmable, cryptographically secure and therefore trusted ledger which no single user controls and which can be inspected by everyone.
Bitcoin is so far the best known blockchain application but the technology will soon give rise to countless others. If, at the moment, blockchain technology records financial transactions made with digital currencies such as Bitcoin, it will in the future serve as a registrar for things as different as birth and death certificates, titles of ownership, marriage licenses, educational degrees, insurance claims, medical procedures and votes – essentially any kind of transaction that can be expressed in code. Some countries or institutions are already investigating the blockchain’s potential.

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Implantable Technologies
2. Our Digital Presence
3. Vision as the New Interface
4. Wearable Internet
5. Ubiquitous Computing
6. A Supercomputer in Your Pocket
7. Storage for All
8. The Internet of and for Things
9. The Connected Home
10. Smart Cities
11. Big Data for Decisions
12. Driverless Cars
13. Artificial Intelligence and Decision-Making
14. AI and White-Collar Jobs
15. Robotics and Services
16. Bitcoin and the Blockchain
17. The Sharing Economy
18. Governments and the Blockchain
19. 3D Printing and Manufacturing
20. 3D Printing and Human Health
21. 3D Printing and Consumer Products
22. Designer Beings
23. Neurotechnologies
Notes
Introduction
Of the many diverse and fascinating challenges we face today, the most intense and important is how to understand and shape the new technology revolution, which entails nothing less than a transformation of humankind.

Blockchain
People have gone mad trying to understand how the blockchain works, never mind trying to explain it. Its most famous application is Bitcoin, the world’s first completely decentralized digital currency.[cccxlix] In just a few years, the Bitcoin “economy” has grown larger than the economies of some countries. The value of a Bitcoin has fluctuated wildly, hitting a peak of $1,216 in November 2013.
The insights which made Bitcoin possible were published in 2008 under the pseudonym Satoshi Nakamoto, and the blockchain is at the heart of it. The blockchain is a public ledger which records transactions. The clever bit is that the ledger is completely trustworthy despite having no central authority, like a bank, to validate it. It is trustworthy in that you can have full confidence that if someone gives you a Bitcoin, then you do own that Bitcoin: the person who gave it to you will not be nipping off to spend the same piece of currency elsewhere, even though it is entirely digital.

Assuming a legal definition for the dollar, it’s folly to assume that private issuers wouldn’t create a dollar measure redeemable for 1/1000th of a gold ounce.
Today, retailers accept all kinds of credit cards, and if private money were legalized, so would they accept certain brands of a “dollar” legally defined as 1/1000th of an ounce of gold. Gradually, a few currencies would win out as money par excellence. Interesting here is that Bitcoin isn’t one of those currencies. Thanks to the creators of Bitcoin’s Friedmanite focus on coin supply, the value of each Bitcoin is notoriously volatile. That’s a problem, because money is best when it’s stable. Future private currencies will focus on stability of value over supply, and the result will be quite special.
Along the lines of the above paragraph, arguably the best answer in light of the U.S. Treasury’s sad oversight of the dollar in modern times is to fully legalize private money without any Treasury or congressional input.

While social currencies cued to locales are proliferating, global alternative currencies that bypass national boundaries are scaling in on the Internet. Bitcoin is a peer-to-peer currency network with millions of bitcoins in circulation. The bitcoin is tradable with other world currencies, and as of November 2013, it was selling around 400 U.S. dollars per bitcoin.25 The creators of the currency, Amir Taaki and Donald Norman, say the idea came to them when they were in Amsterdam, and a friend from the United Kingdom asked them to wire some emergency funds. Their only two options were Western Union and MoneyGram, both of which took a usurious 20 to 25 percent of the transfer in fees. They created bitcoin, an Internet currency, to bypass the fee gouging.26
Futurist Heather Schelgel, who advises the world’s leading banks on transaction standards, doesn’t believe that global, Internet-based currencies will replace traditional currencies, but adds that “as communities begin to realize the possibility of expressing themselves through money, I expect you’ll see hundreds of BitCoin [sic], or something similar—or something we haven’t even thought of yet.”27
Others are even more bullish.

…

They created bitcoin, an Internet currency, to bypass the fee gouging.26
Futurist Heather Schelgel, who advises the world’s leading banks on transaction standards, doesn’t believe that global, Internet-based currencies will replace traditional currencies, but adds that “as communities begin to realize the possibility of expressing themselves through money, I expect you’ll see hundreds of BitCoin [sic], or something similar—or something we haven’t even thought of yet.”27
Others are even more bullish. Jean-Francois Noubel, a cofounder of AOL France, believes it is shortsighted to think that the same disruptive power of a distributed, collaborative, and latterly scaled Internet that gave rise to eBay, Facebook, Amazon, Etsy, and thousands of other ventures wouldn’t make its way into the financial domain. Noubel says he wouldn’t be surprised to see “millions of free currencies circulating on the Net and through our cell phones” in the years ahead.28
Social Entrepreneurship
New business models are beginning to emerge alongside new funding vehicles and social currencies to accommodate the requisites of two very different economies—one, a capitalist economy operating in the market, and the other a social economy operating on the Commons.

To solve this problem, competing exchanges, such as the alternative trading system IEX, are using their own supercomputers to precisely time the order of bids, thereby eliminating the advantages of a Goldman Sachs.36 Architecture can level the playing field, making markets more competitive and fair for all.
One of the most innovative forms of architectural control ever invented made its appearance in 2008, when an anonymous coding genius known as Satoshi Nakamoto published a paper on the Cryptography mailing list defining the Bitcoin digital currency and the so-called blockchain protocol governing it. Although Bitcoin is notable as the world’s first unforgeable digital currency that cannot be controlled by a government, bank, or individual, the blockchain is truly revolutionary. It makes possible fully decentralized, completely trustworthy interactions without any need for escrow payments or other guarantees.
The blockchain is a distributed public ledger that enables storage of data in a container (the block) affixed to other containers (the chain).37 The data can be anything: dated proof of an invention, a title to a car, or digital coins.

Transportation services requested via Uber are delivered on real city streets using actual cars; dinner reservations made via Yelp result in physical meals consumed around real tables in actual restaurants.
Exchange of currency. When goods or services are exchanged between platform participants, they are typically paid for using some form of currency. In many cases, this is traditional currency—money transmitted in one of a variety of ways, including credit card data, a PayPal transaction, a Bitcoin transfer, or (rarely) physical cash.
However, there are other forms of value, and therefore other ways in which consumers “pay” producers in the world of platforms. Video viewers on YouTube or followers on Twitter pay the producer with attention, which adds value to the producer in a variety of ways. (If the producer is a political pundit or business leader, for example, he gains value in the form of growing influence as a thought leader; if she is a singer, actor, or athlete, she gains value in the form of a growing fan base.)

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industry cooperation with law enforcement was sufficient: “Social Media Talks About Rioting ‘Constructive,’ ” BBC, August 25, 2011, http://www.bbc.co.uk/news/uk-14657456.
Bitcoins: Bitcoin is the most successful experiment in digital currency today; it uses a mix of peer-to-peer networking and cryptographic signatures to process online payments. The value of the currency has fluctuated wildly since its inception; the first publicly traded Bitcoins went for 3 cents, and a little more than a year later they were valued at $29.57 apiece. Bitcoins are held in digital “wallets,” and are used to pay for a wide range of virtual and physical goods. At the illicit online market called the Silk Road, where people can use encrypted channels to buy illegal drugs, Bitcoins are the sole currency and generate approximately $22 million in annual sales, according to a recent study.

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Governments will claim that without restrictions or loopholes for special circumstances, capturing criminals and terrorists (among other legitimate police activities) and prosecuting them will become more difficult, planning and executing crimes will be easier and a person’s ability to publish slanderous, false or other harmful information in the public sphere without accountability will improve. Democratic governments will fear uncontrollable libel and leaking, autocracies internal dissent. But if illegal activity is the primary concern for governments, the real challenge will be the combination of virtual currency with anonymous networks that hide the physical location of services. For example, criminals are already selling illegal drugs on the Tor network in exchange for Bitcoins (a virtual currency), avoiding cash and banks altogether. Copyright infringers will use the same networks.
As we think about how to address these kinds of challenges, we cannot afford to take a black-and-white view; context matters. For example, in Mexico, drug cartels are among some of the most effective users of anonymous encryption, both P2P and through the Internet. In 2011, we met with Bruno Ferrari, then the country’s secretary of the economy, and he described to us how the Mexican government has struggled to engage the population in the fight against the cartels—fear of retribution is enough to prevent people from reporting crimes or tipping off law enforcement to cartel activity in their neighborhoods.

They provide an early glimpse into a future where value creation may not need a supply chain, instead being orchestrated via a network of connected users on a platform.
h. Cryptocurrencies
Platform theory helps to explain the workings of cryptocurrencies, like Bitcoin. Decentralized management – through mechanisms like the blockchain – has the potential to change governance structures for the next generation of platforms, much like social feedback tools power curation on many of the current generation of platforms. While we do not explore Bitcoin in detail in this book, the principles laid out apply equally well to understanding all emerging platforms that the book may not explicitly cover.
PLATFORM SCALE IMPERATIVE
At their core, platforms enable a plug-and-play business model. Other businesses can easily connect their business with the platform, build products and services on top of it, and co-create value.

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YouTube, Facebook, and Instagram are described as social platforms, while Uber, Airbnb, and their ilk are referred to as “marketplace platforms.” All these businesses are vastly different from each other.
To complicate matters further, the Nest thermostat is called a platform. Nike is working on a platform to connect its shoes, while GE claims to be using a platform approach to manage its factories. The Internet of Things and Bitcoin may have nothing in common, but they are both platforms.
While all of the above subscribe to the general definition of the platform as a plug-and-play business model that enables interactions, each is vastly different from the others. This chapter proposes a unifying architectural framework to explain the different configurations of platforms.
THE PLATFORM STACK: AN ARCHITECTURAL FRAMEWORK
Across all platforms, the following three distinct layers emerge repeatedly:
Platform Stack
Figure 6a
a.

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Solving the chicken-and-egg problem on such platforms requires solving quality control issues rather than gunning for a critical mass of users.
4.6
THE CURIOUS CASE OF NEW PAYMENT MECHANISMS
Why M-Pesa Works
Finding adoption for a new payment mechanism has always involved solving a chicken-and-egg problem. Ranging from the introduction of new forms of currency in medieval to early modern times, and the adoption of credit cards to the rise of PayPal (as alluded to in many of the strategy discussions in this section) and the recent rage around Bitcoin, new payment systems have regularly offered some of the most complex chicken-and-egg challenges. Both buyers and sellers need to adopt the same exchange mechanism, almost simultaneously. The staging that is possible in some platforms – attracting one side first and then the other – does not work in the case of payment mechanisms. In such scenarios, the solution to finding adoption often lies in providing backward compatibility with existing solutions.

Neal Gorenflo of non-profit Shareable writes that the theme “brought the elephant in everybody’s room to the fore—the gaping contradiction between the utopian possibilities and the hyper-capitalist realities of the sharing economy.” 23
If the newly-skeptical OuiShare attendees are going to find a way to convert the Sharing Economy into something useful, something that actually delivers on the promise of community and human-scale exchange, it must leave aside its identification with technology. There are few signs that it will do so; Gorenflo reports that the “blockchain” technology underlying Bitcoin is the new thing: “Everybody was talking about the blockchain from keynotes to side conversations.” To look for a technical fix, a designed-in mechanism for solving social problems, will only end up going down the same path. Bitcoin itself has already cycled through the familiar trajectory of rebellious alternative, promising a currency independent of the state, through to a venture-capital-funded investment vehicle in which 0.1% of the participants own 50% of the coins.
The debate needs to move away from its exclusive focus on technology companies.

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The problems lie with the ­companies themselves, and with the financial interests using those companies to drive a broader agenda of deregulation in search of private wealth.
The Sharing Economy may be new, but it does have a history and a context, and we need to explore these to understand its agenda, and to understand how it is evolving. Chapters 7 and 8 explore the origins of the Sharing Economy in Internet culture: the values and practices that permeate Silicon Valley companies and the wider world of technology enthusiasts, from open source programmers to Bitcoin advocates to the “maker movement” and beyond.
Any short description will undoubtedly be an oversimplification, and of course there are disagreements and disputes among its adherents, but a coherent Internet culture does exist. It embraces values of rebellion, drawing from a loose set of attitudes sometimes called the hacker ethic. Facebook’s headquarters are at “One Hacker Way” and it has the word HACK laid out in 12-meter letters in the stone.

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In one part of his speech, participants are taking part in a political action:
So what we’re talking about here is not just people sharing their skills, or their apartment, or their car, but also their collective power to expand the Sharing Economy together, and to stand up against entrenched interests who stand unfairly in their way. So “people power” if you like, or more accurately “peer power.”
But a moment later, he is more interested in building businesses:
I attended a meeting of Sharing Economy participants . . . they were developing ideas—brilliant ideas actually—to share customers with each other, across verticals. One person even suggested that there could be a peer economy currency—maybe Bitcoin. Or even points to encourage people to cross verticals and recruit new people into this new economy.
So it is not surprising that almost all the campaigns at Peers were focused on the well-funded sectors of the Sharing Economy represented by Airbnb and Lyft. The highest-profile campaigns, such as the 2014 ridesharing initiative in Seattle, operated side-by-side with well-funded efforts driven by Lyft and Uber themselves.

Such virtual currencies are designed to free money, or more abstractly “value,” from the control of a particular country’s central bank. The World Bank estimates that by 2020, the economy of mobile-phone money exchanges might top $5 trillion and include the two billion people who otherwise have no access to banks.29 Some of the oldest institutions around—universities—have started accepting virtual currencies like Bitcoins for tuition.30 It was easier for governments to hoard and guard their gold than it is data, information infrastructure, and intellectual property. States don’t control public information infrastructures upon which value is exchanged.
For the first time, governments don’t control the information infrastructure upon which public life is lived. They can manipulate devices, but so can many other actors.

The tollway authority would immediately collect its cash from each user. At regular intervals the user would top up the account by adding more money. This could be done at a bank or retail store, but Blumberg prefers the idea of using an anonymous “electronic cash” service like the controversial and little-used Bitcoin system. If an EZ Pass service accepted Bitcoin, a user could add value to the account from any computer, in a manner that would leave behind no trace of his or her identity.30
Aside from the fact that hardly anyone uses Bitcoin, it is difficult to see how this EZ Pass revision would pass muster with police and Homeland Security agencies. They have grown accustomed to using EZ Pass to track down lawbreakers and are not likely to favor a less useful redesign of the system. And law enforcement officials are not the only ones who have grown accustomed to the existing system; so have drivers.

Consider this February 18, 2016, story from NewScientist.com:
Extortion is bigger business than ever, and now it doesn’t have to rely on people depositing bags stuffed with cash. Earlier this month, cybercriminals attacked a hospital in Los Angeles, then demanded payment in bitcoin to let the hospital regain access to their computers. It’s the most high-profile case yet of cyber-extortion using software known as ransomware.
The attack on Hollywood Presbyterian Medical Center effectively knocked it offline. As a result, patients had to be diverted to other hospitals, medical records were kept using pen and paper, and staff resorted to communicating by fax.
The attackers demanded 9,000 bitcoins—around $3.6 million. After a two-week stand-off, the hospital yesterday paid out $17,000 …
“Ransomware has really exploded in the last couple of years,” says Steve Santorelli, a former UK police detective who now works for Team Cymru, a threat intelligence firm based in Florida.

…

One ransomware package, CryptoLocker 3.0, is thought to have earned attackers $325 million in 2015 alone.
“These guys are crazy sophisticated,” says Jake Williams, the founder of cybersecurity firm Rendition Infosec …
Ross Anderson, a security researcher at the University of Cambridge, says bitcoin has helped cybercriminals to access payments without being caught. “In the old days, collecting ransom was really hard. The police would just put a radio tracker in the carpet bag full of £20 notes, and they would always get the guy. Now it’s possible to collect ransoms by bitcoin. Lots of people are doing it.”
Last story: In a February 9, 2016, worldwide threat assessment report to the Senate Armed Services Committee, James Clapper, the U.S. director of national intelligence, added gene editing—for the first time—to a list of threats posed by “weapons of mass destruction and proliferation.”

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“And we can make that guarantee work because, again, we know you, and we have all the data … We have one hundred ninety million customers worldwide and are adding fifteen to twenty million new ones a year.” These guarantees are also driving more globalization.
Slowly but surely people are using PayPal to do away with cash.
Like all big financial players, PayPal is experimenting with the emerging technology known as “blockchain” for validating and relaying global transactions through multiple computers. Blockchain, which is most famously used by the virtual currency Bitcoin, “is a way of enabling absolute trust between two parties making a financial transaction,” explained Schulman. “It uses Internet protocols to make the transaction go around any nation-state in a way that is visible to all the participants and goes beyond all middlemen and regulatory bodies—and therefore has the promise of lower costs.” At the speed that the digitization of money is happening, I am sure I will be writing about blockchain in the paperback edition of this book.

Essentially, they are distributed databases, with a data
model and transaction mechanism, in which different replicas can be hosted by
mutually untrusting organizations. The replicas continually check each other’s integ‐
rity and use a consensus protocol to agree on the transactions that should be exe‐
cuted.
I am somewhat skeptical about the Byzantine fault tolerance aspects of these technol‐
ogies (see “Byzantine Faults” on page 304), and I find the technique of proof of work
(e.g., Bitcoin mining) extraordinarily wasteful. The transaction throughput of Bitcoin
is rather low, albeit for political and economic reasons more than for technical ones.
However, the integrity checking aspects are interesting.
Cryptographic auditing and integrity checking often relies on Merkle trees [74],
which are trees of hashes that can be used to efficiently prove that a record appears in
some dataset (and a few other things). Outside of the hype of cryptocurrencies, certif‐
icate transparency is a security technology that relies on Merkle trees to check the val‐
idity of TLS/SSL certificates [75, 76].
532
| Chapter 12: The Future of Data Systems
I could imagine integrity-checking and auditing algorithms, like those of certificate
transparency and distributed ledgers, becoming more widely used in data systems in
general.

…

., an aircraft crashing and killing everyone on board, or a rocket colliding
with the International Space Station), flight control systems must tolerate Byzan‐
tine faults [81, 82].
• In a system with multiple participating organizations, some participants may
attempt to cheat or defraud others. In such circumstances, it is not safe for a
node to simply trust another node’s messages, since they may be sent with mali‐
cious intent. For example, peer-to-peer networks like Bitcoin and other block‐
chains can be considered to be a way of getting mutually untrusting parties to
agree whether a transaction happened or not, without relying on a central
authority [83].
However, in the kinds of systems we discuss in this book, we can usually safely
assume that there are no Byzantine faults. In your datacenter, all the nodes are con‐
trolled by your organization (so they can hopefully be trusted) and radiation levels
are low enough that memory corruption is not a major problem.

The physical footprint of digital empires has certainly jacked up the cost of living in San Francisco. Amazon’s demand for programmers, salespeople, warehouses, and data servers is redrawing Seattle’s skyline. Hundreds of towns from California to Missouri have blocked Walmart from opening stores that threaten their retail outlets, but they can’t stop Amazon from doing the same by delivering straight to one’s door. At the same time, Bitcoin began as a niche crypto-currency, but people increasingly live off it in the “real” world; if it acquires a banking license to issue credit, it could outmaneuver banks in reaching the bottom billions. Mobile transmission technologies are eclipsing the need for giant towers, and more digital payment and e-commerce mean fewer physical coins: Sweden is going cashless and Canada has stopped minting pennies, something the United States might do as well, meaning less consumption of nickel and other metals.

…

Today approximately thirty corporations control 90 percent of world Internet traffic; Google alone manages an estimated 20 percent of the Internet’s content through websites, storage, and enterprise apps. ISPs, the current backbone of the Internet, prefer self-management and self-regulation to heavy state involvement. Furthermore, the publicly accessible Web is but a small fraction of the total Internet. The Dark Web of anonymous Tor-encrypted networks and Bitcoin transactions, the Deep Web of unindexed pages, corporate intranets, and other publicly unsearchable databases make up the vast majority of the Internet’s content.
Though the Internet has no central authority, it is moving from its halcyon days as an ungoverned stateless commons with only technical supervision into a geopolitical arena of intense complexity. The Web’s founding father, Sir Tim Berners-Lee, has warned against strategic manipulation and advocated a cyber Magna Carta that guarantees the Internet remain a neutral utility.

…

Palestine and Kurdistan act like virtual states through their Internet servers hosted in friendly territories, illustrating how the Internet enables even stateless communities to conduct elections and manage international diplomatic and economic relations. But alliances can also be illusory in cyberspace. Indeed, cloud communities take on not just governments but also each other, such as when Anonymous declared war on ISIS in 2014 or when a hacker group stole $5 million worth of Bitcoin from Europe’s leading exchange Bitstamp in 2015.
The supply chain world’s blending of geopolitical and commercial agendas very much applies to cyberspace as well. The NSA revelations legitimized a surge of techno-nationalism. Particularly in China, where PLA officers were directly named in an American industrial espionage investigation, Microsoft and Cisco were suddenly delisted from government and corporate procurement mandates, replaced by indigenous products such as a Chinese operating system.

What they give back to their host city more than makes up for the cost.44 In 2015, The Economist’s Safe Cities Index ranked Toronto “the best place to live” in the world—confounding those who want to argue that immigration is a bad thing.45
Other big cities showing how to become new global crossroads through deliberate design include Mumbai (global offshore services), Lagos (African trade and finance) and Tel Aviv (technology). Smaller cities, if well run, can become major intersections at a niche or regional level. Copenhagen may never challenge New York or London for traditional financial flows, but it is rapidly becoming a hub for crypto-currencies. Per capita, more Bitcoins are used in Scandinavia than anywhere else.46 Regina, a small city in the middle of the Canadian Prairies, in 2010 opened one of Canada’s largest inland ports, a 1,700-acre Global Transportation Hub, to interconnect North America’s major rail and trucking networks. A city in the middle of nowhere is equidistant from everywhere, and as global trade volumes swell, such places can make themselves essential nodes to help balance loads across different transportation systems.

There are three big properties we might want from such names:
•secure: that when you type the name in you actually get my website and not the website of an imposter
•decentralized: that no central authority controls all the names
•human-readable: that the name is something you can actually remember instead of some long string of randomness
In a classic paper, my friend Zooko argued that you can get at most two of these properties at any one time.
Recently, DNS legend Dan Kaminsky used this to argue that since electronic cash was pretty much the same as naming, Zooko’s triangle applied to it as well. He used this to argue that Bitcoin, the secure, decentralized, human-meaningful electronic cash system was impossible. I have my problems with Bitcoin, but it’s manifestly not impossible, so I just assumed Kaminsky had gone wrong somewhere.
But tonight I realized that you can indeed use Bitcoin to square Zooko’s triangle. Here’s how it works:
Let there be a document called the scroll. The scroll consists of a series of lines and each line consists of a tuple (name, key, nonce) such that the first N bits of the hash of the scroll from the beginning to the end of a line are all zero.

The result has been mostly favorable coverage for Andreessen Horowitz and the start-ups in its investment portfolio. When Andreessen put money into Rockmelt, a middling start-up with the lame idea of developing a new kind of web browser, the tech press went into a frenzy; a few years later, when Rockmelt was sold for scrap to Yahoo, nobody held Andreessen’s feet to the fire. When Andreessen Horowitz piled money into Bitcoin-related companies, the tech press began writing that Bitcoin was the next big thing.
Nobody blinked when two companies in Andreessen’s portfolio, Instagram and Oculus, were acquired by Facebook, where Andreessen sits on the board of directors. These deals were even more remarkable than the Netscape and Loudcloud acquisitions, since while those earlier companies were sold for billions while not turning a profit, Instagram and Oculus were sold for billions without even generating revenue.

…

Says another venture capitalist: “If you take money from Andreessen Horowitz, your valuation doubles or triples just because they’re involved. Why? Because they’re Andreessen Horowitz.”
Andreessen is a physically imposing man: six feet, four inches tall and heavyset, with an enormous shaved head. He’s an avid Twitter user, sometimes posting more than one hundred tweets a day, pontificating and picking fights. When Warren Buffett expressed skepticism of Bitcoin, a technology in which Andreessen has invested heavily, Andreessen called Buffet “an old white man crapping on tech he doesn’t understand.”
Andreessen was quite literally the poster boy for the first dotcom bubble, posing for a February 1996 Time cover sitting barefoot on a throne, a millionaire boy king, twenty-four years old. The first bubble, I believe, became a formative experience for Andreessen and shaped his behavior when he entered the venture capital business.

There is growing interest in alternative money, such as the Bavarian chiemgauer, England's Lewes pound, and the BerkShares program in Massachusetts. Alternative currencies have limited acceptance within a small area and, sometimes, a finite expiry date. They are designed to encourage local business and emphasize community values. The rise of bitcoin, originally intended for anonymous payments for online purchases of illicit items, and of other digital or crypto-currencies reflects, in part, increased concern about the monetary system. But bitcoin is subject to price manipulation and fraud. When one bitcoin exchange collapsed, holders seeking to recover their investment discovered belatedly the rationale for state regulation of payment systems. Irrespective of whether alternative currencies succeed or fail, they are testament to a growing distrust of governments, central banks, and the financial system, and they represent a challenge to the authority and apparatus of the state.

These teams need high-level support and freedom from the usual metrics of return on investment, at least for a while. The theory is fairly easy but putting it into practice is hard: most will need external help, and many will fail.
Of course the disrupters can also be disrupted. A service called La’Zooz (16) is planned, based on the blockchain technology you will have heard about in connection with Bitcoin, which may provide serious competition for Uber.
3.2 – Killer robots
It is not only commerce where AI is threatening disruption. Human Rights Watch and other organisations are concerned that within a decade or two, fully autonomous weapons will be available to military forces with deep pockets. (17) They argue that lethal force should never be delegated to machines because they can never be morally responsible.

Thus ever since the big shakeout, no new credit cards have joined the ranks of the majors; the barrier to market entry has proved to be too great. That said, in recent years the Internet revolution has opened the door to competition from wholly new directions—including new kinds of payment services, such as PayPal; an international network of automatic teller machines to challenge old standbys such as traveler’s checks; and maybe even new types of “virtual money” such as Bitcoin. As I write this in 2014, Apple has announced a new payment system on the latest iPhones, and we can reasonably expect that it and/or other new payment systems that make use of mobile devices will become commonplace.
The bank that handles Amazon’s transactions, or the one that manages the account of your favorite restaurant, is typically different from the bank that issued your credit card and takes your payment.

Ulbricht’s life had been changed by reading Ayn Rand, and the Austrian economist Ludwig von Mises, the oracle of the modern American libertarian movement. According to Mises, a citizen must have economic freedom in order to be politically and morally free. Ulbricht wrote on his LinkedIn page that he wanted to “use [Mises’s] economic theory as a means to abolish the use of coercion and aggression amongst mankind.” With the arrival in 2009 of the anonymous currency Bitcoin, all the pieces were in place to unite Dread Pirate Roberts’s three obsessions: libertarian economics, the Dark Web, and drugs. He built Silk Road in two months and went live in January of 2011 with his own home-cultivated psilocybin mushrooms as a starter product. Within months he had sellers of heroin, cocaine, and methamphetamine as well as prescription opioids doing business on the site. The Silk Road took a cut of every transaction, following the same monopsony model that had been so successful for Amazon.

…

Searching the web for Ross Ulbricht led to a young man from Texas who, just like Dread Pirate Roberts, admired Ludwig von Mises and Ron Paul. Alford was pretty sure he had the proprietor of Silk Road, but it took him more than three months to convince the FBI that this was their man.
Two months after Ross Ulbricht was arrested, the notorious cyberanarchist Cody Wilson, inventor of the world’s first 3-D-printed handgun, stood onstage in London at the MIT Bitcoin Expo and castigated his colleagues: “Ross Ulbricht is alleged to be the founder and operator of Silk Road, the glittering jewel of all things libertarian, black market, and wonderful. And it’s a severe indictment of the modern libertarian conscience that he can’t get any support at all.” Perhaps that’s because Ulbricht used Silk Road to purchase the services of hit men to take out his rivals, who were threatening to assume control of Silk Road.

Thankfully, he reigned in my imagination and clarified: “The IRC channel—we had a channel called #kittencore, and another called #upperdeck. The only difference is that #upperdeck had all the same people in #kittencore but one less.” I asked why they kept one person in the dark. He replied, “Because he came very late into it and we became reluctant to have him in the center and also because he came just as we were splitting the bitcoins.”
“Micro-micro-politics and cabals nested within cabals,” I replied.
It is precisely this mixture of concreteness and abundance—one channel, exactly the same as the other, minus one person, since he is too new and not yet trustworthy—which makes Anonymous both so difficult to describe and so resistant to being slotted into a pre-fabricated mental template. Within Anonymous, the pressure and desire to efface the public presentation of self allows the participants to perform an admixture of their souls, conjuring into existence something that looks always emergent and in flux.

…

In this case that just didn’t happen, and when the database was targeted—albeit in a determined criminal attack—the security measures in place were simply not good enough.”12
In the midst of the turmoil, Sony executives in turn pointed the finger at Anonymous, claiming to have found a file left on the group’s server identifying it as the responsible party. But no Anonymous or LulzSec hacker has ever admitted or been charged for this crime (and five of them, along with two associates, have been found guilty of scores of hacking crimes that involved their hard drives being trucked away for forensic analysis). The PSN hack, a mystery in 2011, is still unsolved today.
“Laundering money, funneling bitcoins, PPI scaming, botnets, database dumping”
The drama that surrounded OpSony’s fouling of the PlayStation Network provided the immediate context for LulzSec’s germination. In mid-April, a few of the hackers on #internetfeds managed to weasel their way into fox.com and steal a sales database. Alongside personal information on Fox employees and journalists, it included over seventy thousand email addresses and passwords for people who had signed up to receive updates about auditions for Fox’s forthcoming TV talent show, The X Factor.

…

Expect more to come, and if you’re like us and like seeing other people get mad, check out our twitter! twitter.com/LulsSec
tflow: perfect
Falcon: though that’s @LulzSec
Falcon: shit son I wrote that off the top of my head in 2 minutes, BRB getting a cookie
Topiary and Sabu offered prescient predictions:
Sabu: oh man lol
Sabu: this is going to be fun
Falcon: LulzSec at its finest
Falcon: laundering money, funneling bitcoins, PPI scaming, botnets, database dumping
Falcon: the lulz they do go on
All that hype, however, was for naught. The first dump yielded little in the way of media response. LulzSec was still totally unknown; it was Friday after all, a terrible day to release something new to the media. But AnonOps was going through serious drama, and these hackers, secure in their newfound identity as LulzSec, could turn to the juicy gossip about an AnonOps operator named Ryan Cleary, who had recently gone rogue.

But what I think his analysis also makes clear is that the evolution of an alternative to capital would require as a necessary but not sufficient condition a radical reconfiguration of how exchange is organised and the ultimate dissolution of the power of money not only over social life but, as Keynes indicates, over our mental and moral conceptions of the world. Envisaging a moneyless economy is one way to get a measure of what an alternative to capitalism might look like. The possibility of this, given the potentialities of electronic moneys or even substitutes for money, may not be so far off. The rise of new forms of cybercurrency, such as Bitcoin, suggest that capital itself is now on the way to invent new monetary forms. It is opportune and wise, therefore, for the left to frame political ambitions and political thought around this ultimate objective.
An alternative monetary politics of this sort becomes more imperative when we consider a particularly dangerous immediate problem. The contemporary form that money assumes has achieved the status of a double fetish – an abstracted representation (pure numbers stored on a computer screen) of a concrete representation (like gold and silver) of the immateriality of social labour.

…

One crucial break occurred with the abandonment of a metallic base to the world’s monetary system in the early 1970s: thereafter the relation of the world’s money to social labour became at best tangential and we have the long chain of financial and commercial crises around the world after the mid-1970s to prove it.
The money form has acquired a good deal of autonomy over the last forty years. Fiat and fictitious values created by the world’s central banks have taken over. This leads us back to some reflections on the relation between the path of technological evolution we have here described and the evolution of monetary technologies. The rise of cyber moneys, like Bitcoin, in some instances seemingly constructed for purposes of money-laundering around illegal activities, is just the beginning of an inexorable descent of the monetary system into chaos.
The political problem posed by the question of technology for anti-capitalist struggle is perhaps the most difficult to confront. On the one hand we know all too well that the evolution of technologies, marked as it is by a good deal of autonomous ‘combinatorial’ logic of the sort that Arthur describes, is a form of big business in which class struggle and inter-capitalist and interstate competition have played leading roles for the ‘human purpose’ of sustaining military dominance, class power and perpetual accumulation of capital.

THE COLOSSUS IS A BFG
NICHOLAS HUMPHREY
Emeritus professor of psychology, London School of Economics; visiting professor of philosophy, New College of the Humanities; senior member, Darwin College, University of Cambridge; author, Soul Dust: The Magic of Consciousness
A penny for your thoughts? You may not choose to answer, but the point is that as a conscious agent, you can. That’s what it means to have introspective access. You know—and can tell us—what’s on stage in the theater of your mind. Then how about machines? A bitcoin for the thinking machine’s thoughts? But no one has yet designed a machine to have that kind of access. Wittgenstein remarked that if a lion could speak, we wouldn’t understand him. If a machine could speak, it wouldn’t have anything to say. What do I think about machines that think? Simple. I don’t think there are, as yet, any such machines.
Of course, this may soon change. Far back in human history, natural selection discovered that given the particular problems humans faced, there were practical advantages to having a brain capable of introspection.

…

The interesting issues unique to AI are adaptability, autonomy, and universality.
Systems that use machine learning are adaptable. They change over time based on what they “learn” from examples. (While it remains linguistically controversial whether machines think, the vernacular has accepted the usage “machines learn.”) Adaptability is useful. We want, say, our automated spelling-correction programs to learn new terms, such as “bitcoin,” without waiting for a new dictionary edition to list them. But sometimes an adaptable program can be nudged, example by example, to the point where its responses are inaccurate. Just as bridge designers must deal with crosswinds, so the designers of AI systems must deal with these issues.
Some critics worry that many AI systems are built with a framework that maximizes expected utility. Such a system estimates the current state of the world, considers all possible actions it can take, simulates their possible outcomes, and then chooses the action leading to the best distribution of possible outcomes.

…

To keep clean our consciences, we need only to create a thinking machine and then vilify it.
WHEN THINKING MACHINES BREAK THE LAW
BRUCE SCHNEIER
Security technologist; fellow, Berkman Center for Internet and Society, Harvard Law School; chief technical officer, Co3 Systems, Inc.; author, Data and Goliath: The Hidden Battles to Collect Your Data and Control Your World
Last year, two Swiss artists programmed a Random Botnot Shopper, which every week would spend $100 in bitcoin to buy a random item from an anonymous Internet black market—all for an art project on display in Switzerland. It was a clever concept, except there was a problem. Most of the stuff the bot purchased was benign—fake Diesel jeans, a baseball cap with a hidden camera, a stash can, a pair of Nike trainers—but it also purchased ten ecstasy tablets and a fake Hungarian passport.
What do we do when a machine breaks the law?

Alertpay, on the other hand, was repeatedly warned by its acquiring banks for dealing with online scams and child pornography sites before being shut down in 2011.
To evade the growing security and control of the payment networks, some bad actors turn to digital currencies. These are alternate currencies that can be traded just like other forms of money, provided that you can find someone in the online world to accept them. Examples range from Bitcoin to the Linden Dollar used in the online world Second Life. Proponents of these currencies often make the argument that they are more efficient ways to trade in a virtual world that doesn’t have clear national boundaries. Especially compared to developing world currencies, they can be more stable than government-backed money, as well as offer the more than 2.5 billion people in the world who don’t have access to traditional banks a way to connect and trade.

…

asymmetric cryptography: The practice of securing data using a public key, which is shared with everyone, and a private key that remains secret. Data encrypted with the public key can only be decrypted with the private key, and vice versa. This allows secure communications without a shared secret.
Autonomous System (AS): An independent network serving as a node in the interconnected Internet. Traffic between ASs is governed by the Internet protocols and routing policies.
Bitcoin: A popular digital currency, first developed in 2008, that offers significant anonymity and requires no centralization or coordinated control.
botnet: A network of “zombie” computers controlled by a single actor. Botnets are a common tool for malicious activity on the Internet, such as denial-of-service attacks and spam, since they provide free (stolen) computation and network resources while hiding the identity of the controller.

If you’re willing to tolerate an error rate of just 1% or 2%, storing your findings in a probabilistic data structure like a Bloom filter will save you significant amounts of both time and space. And the usefulness of such filters is not confined to search engines: Bloom filters have shipped with a number of recent web browsers to check URLs against a list of known malicious websites, and they are also an important part of cryptocurrencies like Bitcoin.
Says Mitzenmacher, “The idea of the error tradeoff space—I think the issue is that people don’t associate that with computing. They think computers are supposed to give you the answer. So when you hear in your algorithms class, ‘It’s supposed to give you one answer; it might not be the right answer’—I like to think that when [students] hear that, it focuses them. I think people don’t realize in their own lives how much they do that and accept that.”

…

weighs in at about seventy-seven characters: Kelvin Tan, “Average Length of a URL (Part 2),” August 16, 2010, http://www.supermind.org/blog/740/average-length-of-a-url-part-2.
the URL is entered into a set of equations: Bloom, “Space/Time Trade-offs in Hash Coding with Allowable Errors.”
shipped with a number of recent web browsers: Google Chrome until at least 2012 used a Bloom filter: see http://blog.alexyakunin.com/2010/03/nice-bloom-filter-application.html and https://chromiumcodereview.appspot.com/10896048/.
part of cryptocurrencies like Bitcoin: Gavin Andresen, “Core Development Status Report #1,” November 1, 2012, https://bitcoinfoundation.org/2012/11/core-development-status-report-1/.
“The river meanders”: Richard Kenney, “Hydrology; Lachrymation,” in The One-Strand River: Poems, 1994–2007 (New York: Knopf, 2008).
use this approach when trying to decipher codes: See Berg-Kirkpatrick and Klein, “Decipherment with a Million Random Restarts.”

At worst, we could end up with a chaotic ever-changing constellation of currencies challenging globalization on three separate fronts: first, the desire for individual countries to deflect their debt problem somewhere else; second, the American economy’s diminishing status on the world stage; and third, the absence of a global financial imperium to replace the US. It’s no great surprise that, given this prospect, interest in new currency algorithms – most obviously the Blockchain that underlies Bitcoin – is on the increase.
‘CONSPANSIONARY’ MONETARY POLICY
Monetary policy’s redistributional qualities are not, however, confined to cross-border effects alone. Within countries, it increasingly appears that monetary stimulus has both expansionary and contractionary effects – a combination that might best be termed ‘conspansionary’.8 Before the global financial crisis, these effects tended to even out over time.

The complete dematerialisation of payments potentially deprives governments and established banking institutions of their traditional mechanisms of control: monopoly of currency issue and access to physical records. The invention of the credit card means that it is no longer necessary to have cash or deposits to make a payment, only a certificate of anticipated future resources sufficient to settle the transaction: a change that is potentially the end of money as we have known it.
The evangelists for bitcoin, the much-hyped digital currency that is a strange mixture of the visionary and the fraudulent – are, in a sense, not imaginative enough. They are simply trying to reproduce in the electronic world a commodity – currency – that has long existed in the material world. The larger question is whether currency as we have known it is any longer necessary at all. I once joked with beginning students that money existed because when a pipe burst it took too long to find a plumber in need of economics lectures – but today it is possible to locate that plumber.

The amount of gold recovered from the earth thus far would fill only a little more than three Olympic swimming pools.2
‡The gold standard is admittedly something of a red herring (gold herring?), in that it isn’t a mainstream idea, though it remains commonplace in certain streams of American political thought. It is relevant, however, because the idea that there must be a hard limit to the amount of money in the world also drives most Silicon Valley–styled schemes to create new forms of money, like Bitcoin.
If the world were to run on a gold standard, then that stash would have to function as the memory of the global computer that humanity uses to plan its economic future. Therefore, the gold standard is a fundamentally pessimistic idea. Limiting our model of how to invent the future to the memory capacity of around 50 billion troy ounces§ is just a way of saying the future holds nothing of surprising value.

Asked why, Will Wang Graylin, the CEO of LoopPay, a digital wallet company focusing on the interface between merchants and credit card firms, explained to MIT Technology Review: “Think about the infrastructure and how long it took to create that. It is very difficult to change merchant behavior.”16 No one knows how this market will evolve, but markets, competition, and consumer behavior – not only the technology itself – will determine its future success.
The same is true for another promising technology that can be applied to the payments market: blockchain, or mutual distributed ledger technology (like bitcoin). The market clearly sees a big potential in blockchain technology. It could reduce the costs and risks in transactions, and create a far better system for sharing information in financial markets. Some have billed it as a greater technological leap than the internet for capital markets. Perhaps it will be, but the hype around the technology is premature and the expectation of big market changes is an aspiration.

And question 4—a question of a sort that probably wouldn’t even have been posed before the Internet—is addressed by any number of sites giving me rankings and reviews of restaurants.
Not everything about Google-knowing is new, however. And that itself is important to appreciate. One humorous illustration of this came in 2013, when the website College Humor asked: what if Google was a guy? The ensuing video was hilarious and a bit disturbing. The questions we ask our search engines (“Hedgehog, cute,” “Bitcoin unbuy fast,” “college girls?”) seem all the more ridiculous (and creepy) once we imagine asking them of an actual person—like an amiable but overworked bureaucrat behind a desk. But it also reminds us of a fact about how we treat Google and other search engines—a fact that is obvious enough but often overlooked. We treat them like personal reference librarians; we ask them questions, and they deliver up sources that claim to have the answers.

The good news is the power that individuals now have, with which they can use those bypasses to manage their own lives. It is becoming a do-it-yourself economy. We can not only buy books online, we can publish our own, should we wish to write any. We need no longer go anywhere near a physical bank; we can even start our own by creating a crowd-funding site. Kickstarter, one of the leading sites, began in 2009 and opened in Britain in 2012. You can, should you wish to take the risk, start your own currency. Bitcoin, Peercoin and Primecoin already exist as internet currencies with a defined amount whose value varies according to the demand, although the risk quickly overtook a couple of the early Britcoin exchanges. Or you can turn banker yourself via a peer-to-peer lending platform.
You don’t have to leave home to go to university any more. With the help of the new free online courses offered by leading universities combined with imaginative video exercises you can, if you are diligent, shape your own degree.

pages: 181words: 52,147

The Driver in the Driverless Car: How Our Technology Choices Will Create the Future
by
Vivek Wadhwa,
Alex Salkever

Census, via the machines that cracked the Nazi enigma code, the CBS vacuum-tube computer, the transistor-based machines used in the first space launches, and more recently the integrated circuit– based personal computer.
* The blockchain is an almost incorruptible digital ledger that can be used to record practically anything that can be digitized: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, medical records, contracts, and votes. Bitcoin is one of its many implementations.
With exponentially advancing technologies, things move very slowly at first and then advance dramatically. Each new technology advances along an S-curve—an exponential beginning, flattening out as the technology reaches its limits. As one technology ends, the next paradigm takes over. That is what has been happening, and it is why there will be new computing paradigms after Moore’s Law.

To create these safeguards, most established crime forums require new applicants to list at least two existing and trusted forum members as references or “vouches,” signaling that one or more existing members of the forum can vouch for the applicant’s skills and integrity and have invited the novice to apply for membership.
New applicants generally also must proffer a nonrefundable deposit, usually in the form of a digital currency such as WebMoney or bitcoins. Assuming the applicant’s references confirm that members know him and can vouch for his skills, the applicant is granted limited access to the forum, which he can then use to introduce himself to the broader community, plead his case for membership, and list any unique talents that his full membership would bring to the forum.
Existing members may use this trial period to haze or verbally abuse the applicant, or to test his knowledge of programming, hacking, or skill sets related to his claimed area of interest or speciality.

If you wanted to protect against this extremely unlikely possibility I would suggest that you diversify across different product providers, products, brokers and custodians.
1 Many companies in the world equity portfolio have large net cash holdings (Apple has over $100 billion in cash at the time of writing) unlike governments which are typically large net debtors. In a really nasty world scenario those cash holdings could prove invaluable and ensure survival longer than many governments. To ensure that you actually own those underlying stocks you would need an ETF to be physical instead of synthetic, where you take credit risk with the issuer.
2 The emergence of virtual currencies/commodities like Bitcoin may provide financial shelter in the future and a potential alternative to gold. These currencies are still in the nascent stages, but if they end up as a recognised asset that can be stored securely I would not be surprised to see its value go up at times of turmoil and stress in the financial markets.
chapter 17
* * *
A wish list aimed at the financial sector
Frustratingly, some simple tools that could help the investor make the best investment decisions are not readily available from the index trackers, banks or financial advisers that have the greatest interaction with individual clients.

Adaptive Markets: Financial Evolution at the Speed of Thought
by
Andrew W. Lo

Later revised by Moore to a
doubling every two years, Moore’s Law has been a remarkably accurate forecast of the growth of the semiconductor industry over the last
forty years.
As computing has become faster, cheaper, and better at automating a
variety of tasks, fi nancial institutions have been able to greatly increase the scale and sophistication of their services. The emergence of
automated, algorithmic, and online trading, mobile banking, cryptocurrencies like Bitcoin, crowdfunding, and financial robo-advisers are
all consequences of Moore’s Law.
Technological innovation has always been intimately interconnected
with financial innovation, a coevolutionary process in which adaptations in one domain have influenced innovation in the other. New stamping and printing processes, used to prevent coin clipping, counterfeiting,
and other forms of financial fraud, led directly to the modern system of
paper banknotes and token coinage.

Furthermore, you may have to motivate such users by recognizing them in a page on your blog.
Another problem with donations is that if you try to earn money from your blog with ads, sponsorships, and affiliate offers, very few readers will feel like donating to you. And if you get rid of those revenue channels, you generally won’t be able to make up for them with donations alone.
I have tried a variety of donation-related approaches, including accepting Bitcoins and receiving micropayments via Flattr and Readability.[93] Earnings were abysmal when compared to other revenue sources. One donation approach that I have seen work many times is having infrequent fund-raising posts,[94] in which the blogger outlines the expenses and time commitment required to keep up the blog and requests (perhaps once a year) that readers to chip in to reach a specific amount of money.

There will be, writes former JP Morgan manager Detlev Shlichter, a ‘transfer in wealth of historic proportions’ from those holding paper assets – whether in bank accounts or pension funds – to those holding real ones, above all gold. Out of the ruins, he predicts, will come a system where all loans have to be backed by cash in the bank, known as ‘100 per cent reserve banking’, together with a new Gold Standard. This will require a massive one-off hike in the price of gold, as the value of all the gold in the world has to rise to make it equal to the world’s wealth. (A similar rationale stands behind the Bitcoin movement, which is an attempt to create a digital currency, not backed by any state and with a limited number of digital coins.)
This proposed new world of ‘real’ money would come at a massive economic cost. If bank reserves have to match loans made, there can be no expansion of the economy through credit, and there can be little space for derivatives markets, where complexity – in normal times – aids resilience to problems such as drought, crop failure, the recall of faulty motor cars etc.

Once one realizes what a GPU can do, and realizes that a GPU is just a different kind of computer, the notion that the brain might somehow not be a computer loses all its force. Many pathways in the visual cortex, for instance, seem to perform transformations on representations of visual scenes, for example, extracting, in parallel edges across a scene. Digital designs like ASICs that are dedicated to specific tasks (like BitCoin mining) show that programs are optional, too; up to certain limits, many programs that might be loaded into memory and executed sequentially can be translated into parallel circuitry that is hardwired and run without a stored program.
In my own view, it is obvious that brains (especially those of vertebrates) are computers, in the sense of being systems that operate over inputs and manipulate information systematically.

But, as always, what began with an attempt to create and share new kinds of sounds ended up triggering other revolutions in other domains. The first true peer-to-peer networks for sharing information were designed specifically for the swapping of musical files. It is still too early to tell, but this innovation may turn out to be as influential as those piano keyboards and pinned cylinders, if in fact peer-to-peer platforms like Bitcoin eventually become an important part of the global financial infrastructure, as many people believe. It is entirely possible that the most significant advance in the history of money since the invention of a government-backed currency will end up having its roots in teenagers sharing Metallica songs.
Whenever waves of new information technology have crested, music has been there to greet them.

All economic exchanges would take place online. Following this line of thought, Glushkov included in his initial OGAS draft proposal a noteworthy provision to eliminate all paper currency, providing in its place wireless money transfers, or a “moneyless system of receipts” over the OGAS network.31 Although modern readers may be tempted to see in his proposal a prototype of the modern-day ATM, e-commerce digital money transfers, PayPal, or BitCoin, Glushkov framed paperless money transfers in the politics of his time and place, calling it the fulfillment of a Marxian prophecy of a future Communist society without hard currency. Read backward in presentist terms, as historians are loath to do, the proposal, if realized, would have transformed the Soviet Union into, in Vladislav Zubok’s phrase, “a computerized socialist utopia, the motherland of the Internet and also possibly the ATM.”32
I maintain that the historical lesson is that whatever our present-day language and whatever the future imaginations of hard currency, the past brims with a variety of visionaries who thought about the future of money as virtual, when as history instructs, the dominant form of currency has already always been, since ancient Mesopotomia, the arithmetic matter of credit and debit—itself a form of expectant funds, or money transfers made virtual across time, not space.33 After reviewing the proposal, Keldysh, then president of the Soviet Academy of Science and a major supporter of Glushkov, asked to meet with Glushkov privately and urged Glushkov to strike from his original OGAS proposal the recommendation of a networked society without hard currency out of fear that it would raise “unneeded emotions.”

But
none of this helps us grasp the imperatives that issue from the systemic
drives of capitalism — the imperative of cheapening labor and expanding markets, the imperative of economic growth, the imperative of constant renovations in production (and now in financial instruments) to
generate profit, and so forth. Certainly, neoliberalism ushers in a new
order of economic reason, a new governing rationality, new modes and
venues of commodification, and of course, new features of capitalism
C h a r t in g N eo l ib e r a l P o l i t i c a l R at i o n a l i t y 75
and new kinds of capital — from sharing economies to Bitcoin, from
derivatives to human capital — but its systematic imperatives cannot
be reduced to any of these things. These imperatives can be radically
refashioned and reorganized (as financialization itself makes clear),
and they are not matters of instinct or of hydraulics, yet they are fundamental life drives no less fierce than those of a living being.
To be very clear, my argument is not that there is only one capitalism, that capitalism exists or operates independently of discourse, or
that capitalism has unified and unifying logics.

pages: 403words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by
Kate Raworth

Model as Narrative
I’m a frustrated novelist. It’s an interest that surfaces from time to time. My first attempt, in the 1980s, was a thriller that portrayed a world without physical currency, where all transactions were done on a system called transNet, and where the central plot revolved around a group bent on destroying the records of that system, throwing the world into chaos. (In other words, Bitcoin gone rogue on a global scale.) There was a backup copy of transNet held in vaults deep under the mountains in Utah (where Mormons keep copies of their genealogical records), but the plot included the erasure of those records once they surfaced. If anyone is interested, I could dust it off and try to finish it, but now the plot would not be so original. Not that originality means much for thrillers.

pages: 431words: 129,071

Selfie: How We Became So Self-Obsessed and What It's Doing to Us
by
Will Storr

‘The Founder is somebody who sees their product as their child,’ he said.
‘So it’s having a vision beyond money?’ I asked.
‘That’s what a lot of VCs look for,’ he nodded.
I left Shannin to cook his next batch of edibles and returned to the kitchen, where I found Berkeley, an earnest twenty-six-year-old in a plaid shirt with cropped hair and a neat beard. Berkeley helped run 20Mission. He’d made his money doing something with the virtual currency Bitcoin that I pretended to understand but didn’t. We began talking about the role of government, and collective projects for the common good, and it quickly became clear he was deeply sceptical. ‘It’s kind of a weird thing, when people say we need to do things for the common good,’ he said. ‘Tech companies made it so that I could get a ride anywhere in the city for five dollars, door to door, and split it with two people.